RESTRICTED
WORLD TRADE WT/ACC/SPEC/EST/3
3September 1997
ORGANIZATION(97-3549)
Original: English Working Party onthe
Accession ofEstonia
ACCESSION OFESTONIA
Communication from Estonia
Attached areadditional questions andreplies inrelation tothedraftReport. Unless otherwise
stated, references toexisting textrelate todocument WT/ACC/SPEC/EST/2/Rev.1 of11April 1997.
_______________
Question 1.
Paragraph 11gives theimpression thatthedifferent licensing structures, e.g.,forretail trade
inmedicines andtelecommunications services, aredistinctions without adifference.
Please elaborate onwhat ismeant inthisparagraph. What national treatment/market access
commitments areoffered intheGATS schedule?
Reply:
BothlicencesfallfullyunderGATSArticle6(DomesticRegulation),hencetheyarenotindicated
intheGATS Schedule ofEstonia.
Question 2.
Please clarify thedifference, ifany,between the“Licence ofActivity ”referred toinparagraph 11
andtheCommercial Register mentioned here. Wewould liketoseeinformation ontherelationship
ofthese requirements included intheappropriate location intheWorking Party Report.
Reply:
TheActivity Licence isalicence thatshows therightofafirmregistered intheCommercial
Register toengage inanactivity andinthescope (ifany)indicated onit.TheCommercial Register
istheauthority toregister afirminEstonia. Byhaving registered afirmintheCommercial Register
anyfirmbecomes legally asubject ofEstonian lawbyobtaining suchrelevant rights andobligations
ofanEstonian firm. Ifanentry intheCommercial Register isapplied forwithregard toanareaof
activity forwhich anactivity licence isrequired, suchactivity licence hastobesubmitted totheregistrar
beforehand. LiketheActivity Licence, theCommercial Register isnotanobstacle todoing business
butasource ofdataabout law-based business.
Question 3.
Thestatement inparagraph 15onnational treatment should specify thatEstonia grants national
treatment intheapplication of“direct ”taxation.WT/ACC/SPEC/EST/3
Page2
Reply:
TheIncome TaxLawapplies toincome derived fromsources bothinandoutside Estonia by
aresident, andincome derived from Estonian sources byanon-resident. Estonia hasprovided the
Working Party withthetextoftheIncome TaxLawof21December 1993. Decree oftheMinister
ofFinance No.20of21January 1994 onRegulations onImplementing theIncome Lawisavailable
forconsultation intheSecretariat (Accessions Division, Room 1126).
Privatization
Question 4.
Please confirm inthetextthat“privatized ”firms are,bydefinition, nolonger “State-owned ”.
Please clarify whether “agricultural enterprises ”and“industrial enterprises ”constitute all
enterprises inState hands.
Please indicate whatportion ofindustrial output, international trade and/or GDP isstillaccounted
forbythe10percentofnon-agricultural firms still“State-owned ”.
Note anylarge firms stillinState hands thathave asignificant position ininternational trade
oraprominent roleinthedomestic orinternational trade incertain products.
Reply:
Bydefinition, theprivatized firms arenolonger State-owned. Insome cases, withtheaim
ofcreating awider basisofshareholders, apartoftheminority shares havebeensoldlatertoinvestors
other thanthecoreinvestor. Fortheperiod between salesofpreviously State-owned majority shares
tothecoreinvestor andtheminority shares tosmaller investors, theowner oftheminority shares is
theEstonian Privatization Agency. However, thisdoesnotinvolve anymeaning oftheGATT 1994
Article XVII onState-trading enterprises since theStateownership foralimited period doesnotbring
anybenefit totheenterprise: itisasoletechnical factthatusually thereisaperiod ofStateownership
oftheminority shares between thetwostages ofprivatization inthecasewhen thismethod isapplied.
Inthemeaning ofthisparagraph allenterprises subject toprivatization were included inthe
twocategories: agricultural enterprises andindustrial enterprises.
In1994, 67.5percentofallbusiness revenues came from private sector, in1995 and1996
thefigures were78.0percentand86.2percent,respectively. In1996, theprivate sector accounted
for63.8percentoftotalrevenues intransport, warehousing andcommunications, 82.7percentin
manufacturing, 89.5percentinrealestate, rental andbusiness services, 97.5percentinconstruction,
and98.6percentinwholesale andretail trade.
Preparatory work forfinalization ofprivatization isreaching thefinalstages. TheGovernment
oftheRepublic ofEstonia hasconfirmed afinallistofcompanies stilltobeprivatized. Included in
thelistarealsothemajor infrastructure enterprises forprivatization, ofwhich aprivatization planfor
eachenterprise hasbeencompiled. These enterprises include themajor operators onEstonia 'srailways,
seatransport, communications andtheenergy sector: Estonian Railway, thePortofTallinn, Estonian
Energy, Estonian Oil-Shale, Estonian Telecom.WT/ACC/SPEC/EST/3
Page3
Question 5.
Paragraph 19describing theGovernment ’sroleinState-owned firms, doesnotaddress theissue
ofpolicy control bytheState-owned enterprises, andwhether “commercial considerations ”are
infactthebasis fordecision-making. IftheState owns afirmandappoints itsmanagement, it
cannot beconsidered aneutral observer inrunning it,including itsfinancial andcommercial
wellbeing.
Please clarify whytheprevious statement thatpurchases ofState firms were notconsidered to
begovernment procurement wasremoved. Wealsoappreciate clarification ofhowtheGovernment
ofEstonia treats State-owned firm procurement: (a)foritsownuse,and(b)foruseinthe
production process. Areeither considered government procurement? Arethere anyspecial rules
forapplication oftaxes, tariffs orother requirements?
Reply:
Among theenterprises stillinState ownership aretheonesthat:
- uponprivatization havethegreatest impact onthewhole business climate (i.e.energy sector,
railways); and
- theoneswhich sofarhavebeenoffered toprivate capital unsuccessfully (liketheperipheral
branches ofsome lowprofit services companies). However, theState (Government) hasto
follow Estonia 'sCompetition Actlikeanyother owner. Therefore, theenterprises stillowned
bytheStatedonotconstitute anyinvolvement oftheGovernment ofEstonia ingovernmental
measures affecting imports orexports byprivate traders. Theenterprises stillinStateownership
havetomakeanyoftheirpurchasesorsalessolelyinaccordancewithcommercialconsiderations
thereby affording theenterprises oftheother contracting parties adequate opportunity, in
accordance withcustomary business practice, tocompete forparticipation insuchpurchases
orsales.
Theonlypolicy thatEstonia currently usesisnotallowing twoofthekeyproducers ofenergy -
EestiEnergia (Estonian Energy) andEesti Põlevkivi (Estonian Oil-Shale) -toraisetheprice oftheir
products tothelevelthemanagements ofthese enterprises would consider necessary. Theobjective
ofthispolicy istobreak softly andwithout unwanted social consequences thedifference between the
former lowprices forenergy andthemuch higher world market prices. Estonia 'scurrent prices for
electricity andoil-shale havebeenprovided intheprevious responses tothequestions onthedraftReport
(paragraphs 22-24).
Thepurchases ofStatefirms arenotconsidered government procurement because ofthefact
thattheGovernment hasnorighttointervene withthedaily operations ofanyoftheenterprises still
owned bytheGovernment. Boththepurchases bysuchfirms for:(a)theirownuse,and(b)foruse
intheproduction process aretheissues ofdaily operation oftheenterprises inquestion andtherefore
arenotconsidered tobegovernment procurement. Theeffectiveness ofsuchpolicy isguaranteed by
theCompetition Act.Government procurement inEstonia isthepurchase bytheGovernment authorities
oftheequipment andservices needed forultimate consumption ingovernment useandnototherwise
forresale oruseintheproduction ofgoods forsale.Running business cannot beagovernment function.
Accordingly there cannot beanyspecial conditions offered bytheGovernment totheenterprises still
inGovernment ownership. Forfurther details please seetheLaw onPublic Procurement of
1January 1996andthePublic Procurement Amendment Act,bothofwhich Estonia hasmade available
formembers oftheWorking PartyWT/ACC/SPEC/EST/3
Page4
Question 6.
Weseekamore focused commitment totransparency intheareaoftrade reform andprivatization,
andbelieve thatreporting would bemore frequent thanthesix-year cycleofTrade Policy Reviews.
Inaddition, wewould appreciate theinsertion intheWorking Party Report ofatable describing
thestatus ofEstonia ’sprivatization process similar tothat produced byBulgaria in
WT/ACC/BGR/5, Information onProgress ofthePrivatization Process ofState Enterprises.
Reply:
In1991 theconsolidated netturnover ofState-owned enterprises wasover95percentofnet
turnover ofallenterprises. Bytheendof1996 theshare ofState-owned entities intotalnetturnover
forallenterprises haddecreased totheaverage levelof10percent. Hence theongoing privatization
programme hasentered itsfinalphase -privatization ofmaininfrastructure sectors e.g.Estonian Energy
(generating, transmitting anddistributing electrical energy), Estonian Oil-Shale (mining oil-shale),
Estonian Railway, PortofTallinn andEstonian Telecom. Themaininfrastructure sectors 'privatization
isarelatively complicated process andtherefore takesplaceaccording totheprivatization plansapproved
bytheGovernment andevery change inthese plans needs aseparate Governmental approval. Taking
intoaccount thattheprivatization process inEstonia hasbeenalmost completed andtheremaining
privatizationofinfrastructuresectorsiscomplicatedandthereforetime-consumingprocess,therequested
periodical annual reporting system willrepeat thesameinformation fromonereport toanother. Estonia
isready toensure thetransparency ofherprivatization programme finalization under theregular trade
policy reviews intheWTO inaccordance withthenotification andconsultation provisions oftheWTO.
Estonia canprovide information inthefollowing form:
- privatizationbytenderswithpreliminarynegotiationsduring1993-1996(Tenderwithpreliminary
negotiations isusedinsituations which require additional conditions likeemployment and
investment guarantees inprivatization ofmajor industrial andservice companies intheopen
sector.):
1993 1994 1995 1996 Total
A.Number ofprivatization
contracts54 215 142 43 454
B.Price (million EEK) 353.20 1,330.37 919.12 474.48 3,077.17
C.Average price (million EEK) 6.54 6.19 6.47 11.03 6.8
D.Liabilities accepted (million EEK)
bythebuyers195.56 700.23 617.87 230.26 1,743.92
E.Investment guarantees (million
EEK)236.76 858.49 1,002.89 453.60 2,551.74
F.Number ofjobsunder
employment guarantees9,099 25,573 17,279 1,274 53,225
G.Total obligations accepted bythe
newowners (B+D+E+Fx15,000)
inmillion EEK921.10 3,272.69 2,799.06 1,177.45 8,171.20
Themonetary value hasbeen rounded tothenearest fullthousand.WT/ACC/SPEC/EST/3
Page5
- privatization through openbidsbetween 1991-1996 (Public auction method isusedforbidding
intheopen sector when setting additional conditions isnotnecessary orifitispossible to
determine theconditions before announcement oftheauction. Thismethod isalsousedin
privatizing rented assets andinselling minority shares.):
1993 1994 1995 1996 Total for
1991-1996
A.Number ofdeals 252 126 120 84 1,280
B.Total value ofdeals (million
EEK)122.79 68.17 79.80 148.71 442.94
C.Average price (million EEK) 0.507 0.541 0.665 1.770 0.346
Themonetary value hasbeen rounded tothenearest fullthousand.
- public salesofshares during 1993-1996 (Allshares aresoldinanauction, where thefinalprice
oftheshare isformed bythebidders making anearlier bidsetting theequilibrium pricewhich
isthenapplied tosalesofallshares.):
1993 1994 1995 1996
A.Number ofcompanies none 1 16 16
B.Price (million EEK) none 99.87 604.54 662.07
C.Average price (million EEK) none 32.63 92.06 172.31
D.EVPpernominal value ofshare
(B/C)none 3.06 6.57 3.84
Themonetary value hasbeen rounded tothenearest fullthousand.
TheEstonian Privatization Agency hasitshome page inInternet (http://www.eea.ee/). It
contains thefollowing information about theprivatization process:
- thePrivatization Programme oftheState Property for1997;
- privatization inEstonia -general information andprivatization perspectives in1997;
- Estonian LawonPrivatization.
Theinformation isupdated every twomonths.
Price Policies
Question 7.
Wesuggest thatthetables ofexisting price controls could bemoved totheendoftheWorking
Party Report. IftheGovernment applies price controls toimports onbehalf ofthese firms, and
owns andoperates them, isthisnotState-trading?WT/ACC/SPEC/EST/3
Page6
Reply:
TheGovernment doesnotapply price controls onbehalf ofthese firms: thefirms negotiate
theirterms oftheirimports independently. TheGovernment onlysetsamaximum limittotheprice
oftheirfinalproducts -notthecostoftheseproducts. Although theGovernment owns thesetwofirms,
itdoesneither operate norcreate anybenefits tothem: thereisnoState-trading going oninthemeaning
ofArticle XVII oftheGATT 1994.
Question 8.
Wewould liketoensure thatthecommitment Estonia isprepared totakeontheissue ofuniform
application oftheWTO isprecise andcomprehensive.
Wedonotfavour theincorporation of“assurances ”intheprotocol, butrather “commitments ”
thatsomething either willorwillnothappen, andwewould liketoclarify what theprimacy of
theWTO Agreements inEstonian lawwillactually mean.
Wewould therefore propose aslightly different formulation onapplication ofWTO measures
bysub-central authorities, e.g.,
"28. Therepresentative ofEstonia stated thatifEstonian lawsorother actsshould befound
tocontradict foreign treaties ratified bytheEstonian Parliament Riigikogu, theprovisions ofthe
foreign treaty would apply. TheWTO Agreement would have thestatus ofaforeign treaty.
Therepresentative ofEstonia confirmed thatsub-central entities hadnoautonomous authority
overissues ofsubsidies, taxation, trade policy andanyother measures inrespect ofimports and
exports covered byWTO provisions. Heconfirmed thattheprovisions oftheWTO Agreement,
including Estonia ’sProtocol, shallbeapplied uniformly throughout itscustoms territory andother
territories under itscontrol, including inregions engaging inborder trade orfrontier traffic,
special economic zones andother areas where special regimes fortariffs, taxes andregulations
areestablished. Headded thatwhen apprised ofasituation where WTO provisions were not
being applied orwere applied inanon-uniform manner, central authorities would acttoenforce
WTO provisions without requiring affected parties topetition through thecourts. TheWorking
Party tooknoteofthese assurances commitments."
Reply:
Estonia cannot accept thedeletion ofthephrase: “inrespect ofimports andexports ”.Estonia
agrees withthereplacement of“assurances ”for“commitments ”.
Estonia hasprovided theWorking Party withtheLawonLocal Taxes according towhich
municipal andtowncouncils havetherighttoissuedecrees imposing localtaxes. Thefollowing taxes
areconsidered aslocal taxes: polltax,local income tax,sales tax,boattax,commercial and
advertisement tax,taxforclosing roads andstreets, motor vehicle tax,taxforkeeping animals and
entertainment tax.Sub-central governments alsohavetherighttoprovide green-box andnon-actionable
subsidies from thelocalbudgetary revenues.
Since theforeign treaties similarly apply tothesub-central entities, anyissues ofsubsidies,
taxation oranyother measures bysub-central entities should, under Estonian law,beadministered
inaWTO-consistent manner. Theissue oftrade policy cannot becovered bythesub-central entities
andisadministered inaWTO consistent manner bythecentral government only.WT/ACC/SPEC/EST/3
Page7
Trading Rights
Question 9.
Wewould likethetextoftheWorking Party Report toincorporate theconcept thatrequirements
forCommercialRegistrationare“generallyapplicable”,i.e.,notspecialized.Whatarethecriteria?
Dotheyapply uniformly toall,orarethere special provisions forcertain firms, other thanthose
noted forforeign investment? Thecurrent formulation, “generally regulated intheCommercial
Code”doesnotseem toconvey thesame meaning.
More specifically, weneedclarification intheWorking Party Report responding tothequestion
inWT/ACC/EST/9, Annex II,concerning theeligibility ofimports toapply forlicence:
“1. Areallpersons, firms andinstitutions eligible toapply forlicences:
(a) under restrictive licensing systems?
(b) under non-restrictive systems?
...isthere asystem ofregistration ofpersons orfirms toengage inimportation? What persons
orfirms areeligible? Isthere aregistration fee?Isthere apublished listofauthorized importers? ”
Estonia ’sresponse that“firms andinstitutions should beregistered under Estonian laws”isnot
sufficiently precise.
Reply:
TheCommercial Registration isgenerally applied toallbusiness operations, including theones
thathaveapplied foraForeign Investment Licence. TheCommercial Registration uniformly applies
toevery firm.
According totheCommercial Code thebasis foranentry totheCommercial Register isa
submission oftherequired documents byatrader. Theregistrar mayalsodemand supplementary
documents fromthetrader ifthesearenecessary todetermine thefactswhich arethebasisforanentry.
Anentry inthecommercial register ismade upon theapplication ofthetrader, onthebasis ofcourt
order oronanother basisprovided bythelaw.Signatures onanapplication submitted totheregistrar
havetobenotarized. Theregistrar hasnorighttodecline tomake anentry ifalldocuments required
bythelawaresubmitted, andtheycomply withtherequirements. Therequired documents vary
depending ontheclassification ofcommercial undertakings. Concrete criteria forentering Commercial
Code areprovided inCommercial code (Sole Proprietorship chapter 75,General Partnership
chapters 82-84, Limited Partnership chapter 127,Private Limited Company chapters 137-145, Public
Limited Company chapter 25,Branch chapters 386-387). Ifanentry intheCommercial Register is
applied forwithregard toanareaofactivity forwhich anactivity licence isrequired, thisshallbe
submitted totheregistrar beforehand.
There isnosystem ofregistration ofpersons orfirms toengage inimportation except those
covered bytheActivity Licences, inwhich caseanybody fulfilling asetofobjective criteria (e.g.relevant
education, aplace tocarry outtheactivity, fulfilling thesanitary requirements, cleartaxrecord, etc.)
canhavesuchalicence. There isnodifferentiation between foreign anddomestic firms foreither
thenon-automatic norautomatic (obligation toannounce thebeginning ofthebusiness activity) licences.
There isafeeforlicensing which isnohigher thannecessary forcovering therelevant costs
which inmostcases donotexceed EEK 1,000 (EEK 8=1DEM); inthecaseofalcohol andtobacco
thelicence costs EEK 10,000.WT/ACC/SPEC/EST/3
Page8
There isnolistpublished about theimporters. Thatisnotfeasible duetothefactthatthe
computerized listkeptbyrelevant authorities contains theowners ofvalid activity licences.
1. Import Regulation
Application ofInternal Taxes toImports
Question 10.
Please clarify ifthethreshold forproduction forsmall beerproducers is(a)5,000 or(b)300,000
dekaliters, i.e.,(a)asspecified inparagraphs 40and43or(b)inparagraph 42.
Please supply intranslation thelegal provisions referred to.
Reply:
TheLawonAlcohol Excise TaxandtheLawonAmending theLawonAlcohol Excise Tax
(entered intoforce on1July1997) havebeenprovided totheWorking Party. According totheselaws
excise taxonbeerisapplied according totheannual production asfollowing:
Tariff heading, subheading Annual production /product description Taxrate(EEK)
2203 00011
2203 00091
2203 00101
2203 00019
2203 00099
2203 00109Annual production upto5,000 decalitres
(incl.)
-beerwithanalcoholic content byvolume
upto4.7% vol.
-beerwithanalcoholic content byvolume
exceeding 4.7% vol.exemption
exemption
2203 00011
2203 00091
2203 00101
2203 00019
2203 00099
2203 00109Annual production from 5,000 to500,000
decalitres (incl.):
-beerwithanalcoholic content byvolume
upto4.7% vol.
-beerwithanalcoholic content byvolume
exceeding 4.7% vol.2.00
2.50
2203 00011
2203 00091
2203 00101
2203 00019
2203 00099
2203 00109Annual production from 500,000 to
2,000,000 decalitres:
-beerwithanalcoholic content byvolume
upto4.7% vol.
-beerwithanalcoholic content byvolume
exceeding 4.7% vol.2.50
3.00
2203 00011
2203 00091
2203 00101
2203 00019
2203 00099
2203 00109Annual production surmounting
2,000,000 decalitres:
-beerwithanalcoholic content byvolume
upto4.7% vol.
-beerwithanalcoholic content byvolume
exceeding 4.7% vol.3.00
3.50WT/ACC/SPEC/EST/3
Page9
Question 11.
Please clarify inthetextthatthecategory "unbottled wines offresh grapes" (Table 3)iswine
soldinbulk. Please provide thelegal textthatdeals withtheexcise treatment ofwineimported
inbulkandrebottled.
Reply:
Estonia would have towithdraw theanswer toprevious round ofquestions andanswers
concerning thetaxation ofunbottled wines offresh grapes because oftheincorrect interpretation of
thelegalacts. Thus Estonia wishes todelete thelastsentence ofparagraph 44asanincorrect one.
According totheLawonAlcohol Excise, theLawonAmending theLawonAlcohol Excise
Tax,Implementation ActonLawonAlcohol Excise TaxandtheOrder onImport, Export, Production
andSales ofAlcohol, Tobacco andTobacco Products theexcise taxonunbottled wineisimposed only
once. There isnoadditional excise taxafterunbottled wine hasbeen bottled. According tothe
above-mentioned legal acts,unbottled wine issubject tothelower rateofexcise tax(EEK 8.00or
EEK 12.50 perlitredepending onthealcohol content byvolume) onlyinthecasewhen itissubject
forprocessing orbottling intoconsumers ’package bytheimporter before sale,exchange, freesampling
orselfconsumption. Consumers ’package isconsidered tobeapackage inwhich retail saleofgrape
wineoccurs. Inanyother case(i.e.when unbottled wine issold, exchanged, etc.without bottling
itfirst)theimporter would havetopayahigher excise tax(EEK 10.40 orEEK 15.60 perlitredepending
onthealcohol content byvolume).
Thecriterion whether animporter isgoing tobottle theunbottled wine andthusbecomes
legitimate tothelower excise rateistheactivity licence. Ifanimporter hasalsoalicence forproduction
ofalcohol, itispresumed thatunbottled wineisgoing tobebottled bytheimporter. Thecontrol whether
thisactually occurs isperformed bytheEstonian National TaxBoard.
Question 12.
Please provide thefollowing information: Arethere domestic sales inthecategory "unbottled
wines offresh grapes". Arethere imports? What istherelative sizeofboth? Howisthisproduct
usedandbywhom? Does itinvolve small wineries that"produce" little wine domestically but
bottle imports?
Reply:
There isnodomestic production ofwineoffresh grapes inEstonia. Theimports ofunbottled
winein1996constituted 185,902 litres, ofwhich 91percentwastheunbottled winewithanalcoholic
content byvolume upto15percent.
Question 13.
Please describe inthereport "other fermented drinks" categories andthenature andscope of
thelocal production andimports.
Reply:
Theexpression "other fermented drinks" means thelistinpoint 3oftheAnnex oftheAlcohol
Excise Act. Forinstance: cider, berry wine, mead, etc.WT/ACC/SPEC/EST/3
Page10
Question 14.
Please indicate how"rectified spirits" arecertified formedicinal uses.
Reply:
Spirits usedformedical purpose doesnotdiffer fromordinary spirits, butisassessed according
toitsuse. Inorder tobuysuchspirits thepurchaser shallsubmit anapplication totheMinistry of
Finance inwhich itshallbeindicated whatisthepurpose oftheuseofspirits andthenecessary annual
amount based ontheconsumption norms. Thelicence forselling spirits shallbeissued bytheMinister
ofFinance.
Question 15.
HasEstonia provided theWorking Party withthetextoftheamended Excise Taxlaws?
Reply:
Estonia hasprovided theLawonAlcohol Excise TaxandtheLawonAmending theLawon
Alcohol Excise Tax(document WT/ACC/EST/18). TheImplementation ActonLawonAlcohol Excise
TaxandtheOrder onImport, Export, Production andSales ofAlcohol, Tobacco andTobacco Products
havenotbeentranslated.
Question 16.
Wedonotagree thattaxing onlyimported usedcarsprevents double taxation. Therationale
usedappears thesame asforbulkwine, but,unlike thepractice forthiscommodity, there isno
credit foronward sales orprocessing. Forused autos, what prevents application ofthenet
additional excise todomestic sales ofusedvehicles?
Thistaxappears tobestructured more likeatariff thananondiscriminatory internal tax.We
willneed tocontinue toreview theissues.
Reply:
According totheLawMotor Vehicle Excise Taxtheexcise taxispaidbythemanufacturer
ofmotor vehicles upon itssales, exchange, gratuitous transfer orselfconsumption. Onward saleor
processing isnotsubject toexcise tax.
Question 17.
Please describe thetypeoffirms actually using the"small business" exemption from theVAT.
Arethese production orservice firms, orboth? Dotheyimport? Wereserve onthetextofthe
"commitment paragraph" pending clarification andresolution oftheissues noted above onVAT,
excise andautotaxes.
Reply:
Instatistical terms itisunfortunately impossible todifferentiate these “small business ”onthe
basis ofthetypeofactivity theyareengaged in.According toexpert opinion, thesignificant part
ofsuchfirms aretheoneswhoofferservices ofminor scope. Inthatcase,theinput costsarerelatively
small anditiseconomically rational nottoregister asaVAT payer.WT/ACC/SPEC/EST/3
Page11
Quantitative Import Restrictions, Including Prohibitions, Quotas andLicensing Systems
Question 18.
Please clarify whether thereference toCommercial Registration inthetrading rights commitment
isrelated totheActivity Licensing described inthissection. Unify theterminology orclarify the
difference between therequirements.
Reply:
TheActivity Licence isalicence thatshows therightofafirmregistered intheCommercial
Register toengage inanactivity indicated onitandinthescope (ifany)indicated onit.TheCommercial
Register istheplace toregister afirminEstonia. Byhaving registered afirmintheCommercial
Register, anyfirmbecomes legally asubject ofEstonian lawbyobtaining suchrelevant rights and
obligations ofanEstonian firm. Ifanentry intheCommercial Register isapplied forwithregard
toanareaofactivity forwhich activity licence isrequired, thishastobesubmitted totheregistrar
beforehand. LiketheActivity Licence, theCommercial Register isnotanobstacle todoing business
butasource ofdataabout law-based business.
TheCommercial Code covers theareas ofactivity inGeneral Provisions, paragraph 4(Areas
ofactivity oftrader):
- atrader mayoperate inareas ofactivity inwhich operation isnotprohibited bylaw;
- areas ofactivity forwhich alicence isrequired orinwhich onlyaparticular classoftrader
mayoperate maybeprovided bylaw;
- theareaofactivity indicated inthearticles ofassociation ofacommercial undertaking and
anentry inthecommercial register concerning theareaofactivity ofatrader shallnotbe
misleading withregard tothetypeorscope ofactivity ofthetrader.
Question 19.
Willthenumber ofactivities requiring licences change (e.g., bereduced) withthenewLicensing
Law? How isthedraft coming? Paragraph 56indicates thatitwillbemade available tothe
Working Party. When canweseeit?How hasthisaffected your GATS negotiations?
Wereserve ontheissue ofthe"commitment paragraph" until wehave achance toreview the
newlicensing law.
Reply:
Atpresent theLawonLicensing isstillinthestageofdiscussion. Thedraftforesees, inaddition
totheActivity Licence, alsoanObligation toAnnounce theBeginning ofOperations (anautomatic
licence) toendeavour tocutthenumber ofanynon-automatic licences needed. Thedraftlawdoes
notforesee setting anylimits totheareas ofactivity subject tolicensing -instead itwould setan
obligatoryframeworkforanylicensingbytheGovernmentsothattherewouldbeperpetuatedconformity
withtheagreements ofGATT 1994, especially withtheAgreement onImport Licensing Procedures.
Since thecriteria forActivity Licensing fallunder Article 6(Domestic Regulation) oftheGATS,
Estonia doesnotinclude anyoftheActivity Licences inthecommitments under theGATS schedule.
Where authorization isrequired forthesupply ofservices onwhich specific commitments havebeenWT/ACC/SPEC/EST/3
Page12
made, thecompetent authorities ofEstonia shall, within areasonable period oftimeafterthesubmission
ofanapplication considered complete under Estonian lawsandregulations, inform theapplicant of
thedecision concerning theapplication. Attherequest oftheapplicant, thecompetent authorities of
Estonia shallprovide, without undue delay, information concerning thestatus oftheapplication. In
sectors inwhich Estonia hasundertaken specific commitments Estonia shallnotapply licensing and
qualification requirements andtechnical standards thatnullify orimpair suchspecific commitments
inamanner which doesnotcomply withthecriteria outlined insub-paragraph 4ofArticle VIofthe
GATS northose which could notreasonably havebeenexpected ofEstonia atthetimethespecific
commitments inthose sectors weremade. Asforprofessional services inwhich commitments were
undertaken byEstonia, Estonia shall provide foradequate procedures toverify thecompetence of
professionals ofanyother Member.
Customs Valuation
Question 20.
Thetextindicates thattheissues wehaveraised concerning thevaluation ofrelated parties 'trade,
theuseoftestvalues andminimum import prices arecovered inEstonian lawandregulation,
consistent withtheWTO Valuation Agreement. Wearenotprepared toagree thatEstonia 's
implementation oftheValuation Agreement meets WTO requirements untilwehaveabetter fix
oncurrent lawandpractice. Related parties ismost sensitive aspect ofcurrent customs valuation
inmostcountries, evenmore thanvalue manipulation. Useoflistsastestcanbecome theequivalent
offixed import values iftheAgreement 'shierarchy ofvaluation methods isnotused.
Please provide citations andtranslated textofthelawsandregulations thatimplement these aspects
oftheValuation Agreement.
Reply:
Atranslation oftheRegulation No.4of11January 1996, issued bytheMinister ofFinance
“Order ofdeclaring, determining andadjusting thecustoms value ofgoods ”concerning theuseof
testvalues andthevaluation ofcarrier media ”isavailable forconsultation intheSecretariat (Accessions
Division, Room 1126).
Rules ofOrigin
Question 21.
Could Estonia respond totherequest articulated inparagraph 66?Forus,tariffs arenotthe
soleissue. DoesEstonia haverules oforigin indevelopment intheexpectation that,atsome point,
itmayneed them?
Reply:
Estonia willstarttoelaborate thenewCustoms Code inautumn 1997 andinconnection with
thiswillenact alsonon-preferential rulesoforigin. Thenon-preferential rulesoforigin willcomply
fullywiththeWTO Agreement onRules ofOrigin.
After harmonization ofrulesoforigin byWTO Estonia willenact non-preferential harmonized
rules oforigin. There arenoenacted non-preferential rules oforigin atpresent inEstonia. Rules of
origin forpreferential tradecomply fullywiththedisciplines under theCommon Declaration inAnnex II
oftheAgreement.WT/ACC/SPEC/EST/3
Page13
Anti-dumping, Countervailing Duties andSafeguard Regimes
Question 22.
Thecommitment language isinthemain okay. Based onnewinformation, however, weneed
anexplanation astotherelationship withArticle 8oftheDraft Customs Tariff Law. Theconcern
isthatthiswould beconsidered "appropriate law"andthatthiswould trigger useofmeasures.
"...elaboration ofanylegislation," isthatregulations, orseparate laws?
Reply:
Estonia willprovide anewdraftoftheCustoms Tariff Lawassoonasitistranslated into
English. Inthisnewdraft, Article 8hasbeen modified anditdoesnotinclude provisions about
anti-dumping orcountervailing duties. Nevertheless asstated inthecommitment inparagraph 70,
Estonia willnotapply anti-dumping orcountervailing duties untilithasimplemented appropriate laws.
These measureswill notbecovered bytheCustoms Tariff Law.
2. Export Regulation
Customs Tariffs, FeesandCharges forServices Rendered, Application ofInternal Taxes toExports
Question 23.
Wewould liketoseetheappendix referred toinparagraph 71.Ifexport taxes exist, theyshould
belisted bytariff line,thelevelnotified, andthere should besome reference towhythese exist
andwhat their duration should be.
Wepropose thefollowing text:
"71.(a) Therepresentative ofEstonia confirmed thattheexport taxes ongoods andservices
applied byEstonia were listed inAppendix ...attached toitsaccession protocol, listed byHS
number andincluding thelevelofthetax.These taxes areauthorized under ...andareapplied
inorder to...After accession totheWTO, Estonia willminimize theuseofsuchtaxes andany
suchtaxes applied willbeinaccordance withtheprovisions oftheWTO Agreement andpublished
intheOfficial Gazette. Changes intheapplication ofsuch measures, their level, scope, or
justification, willalsobepublished intheOfficial Gazette. TheWorking Party tooknoteofthese
commitments."
Reply:
Estonia proposes thefollowing text:
“Therepresentative ofEstonia confirmed thattheexport taxesongoods andservices applied byEstonia
werelisted inAppendix ...attached toitsaccession protocol, listed byHSnumber andincluding the
levelofthetax.These taxes areauthorized under Government Decree No.52of19February 1992
“Order ofImposing Customs Duties ”andareapplied inorder tomaintain thenational cultural heritage.
After accession totheWTO, Estonia willminimize theuseofsuchtaxes andanysuchtaxes applied
willbeinaccordance withtheprovisions oftheWTO Agreement andpublished intheOfficial Gazette.
Changes intheapplication ofsuchmeasures, theirlevel, scope, orjustification, willalsobepublished
intheOfficial Gazette. TheWorking Party tooknoteofthese commitments. ”
Onexportation, thecustoms dutyisimposed oncultural values (including antique carsand
other motor vehicles withtheproduction yearof1950 orearlier) inextent of100percentoftheirWT/ACC/SPEC/EST/3
Page14
price. Prices forthecultural values intended forexport aredetermined bytheExpert Division on
Exportation ofCultural Values oftheCentral Board ofAntiques. HSdoesnotmake anydifference
inthehistorical period theitems belong andtherefore itisimpossible tolisttheobjects subject tothe
export dutybyHSnumbers.
Export Restrictions
Question 24.
There aretwoseparate issues inparagraphs 72and73:firsttheuseoflicensing torestrict exports
andsecond theState-trading aspect. Forthepurpose ofthissection, weproposed toaddress
thelicensing requirement.
Wepropose dividing paragraph 72intotwoparts, withthesecond (new) paragraph beginning
..."Export control measures ..",todistinguish itfrom thediscussion above ontheelimination
ofquotas andactivity licensing.
Reply:
Estonia agrees withthedivision ofthisparagraph intotwoseparate paragraphs.
Question 25.
Automatic licensing ofscrap andradioactive materials forthepurpose stated would notappear
tobeWTO inconsistent. Estonia should elaborate onthisinthesecond (new) paragraph, e.g.,
notetherequirements thatmust bemetfortheautomatic export licence, givedataonrecent
exports, describe howtheState makes these materials available forexport without restriction,
etc.
Reply:
Atpresent Estonia hasnolicensing ofscrap andradioactive metal tradebutamonopoly falling
under Article XVII ofGATT 1994.
According totheDecree oftheMinister ofEconomic Affairs No.3of26March 1996 “On
theRules ofPurchase andExport ofScrap Metal ”system ofcontrol covering scrap metal andother
metal waste refers tothefollowing HScodes:
7204.00000 8101.91900 8108.10900
7404.00000 8102.91900 8109.10900
7503.00000 8103.10900 8110.00190
7602.00000 8104.20000 8111.00190
7802.00000 8105.10900 8112.20390
7902.00000 8106.00100 8908.00000
8002.00000 8107.10900
Thisorder oftradeinscrap metal doesnotcover importation andtransit ofthemetals indicated.
Thefirmentitled toadminister thecontrol EMEX isobliged toinform thepopulation andtheenterprises
through mass communication about theorder ofpurchase ofthese substances from thenatural and
physical persons. EMEX isobliged tocontrol thedegree ofradioactivity upon purchase. Inthecase
thesubstance submitted forpurchase isexceeding thenorms ofradioactivity EMEX mustimmediatelyWT/ACC/SPEC/EST/3
Page15
inform theRescue Service. Intheterritory ofEstonia onlyEMEX maypurchase metal scrap from
thenatural persons onlywhen thenatural persons identity canbedocumented. EMEX hastheright
todemand fromtheseller ofthemetal object(s) theorigin ofthat(these). Inthecasetheorigin cannot
berestored, EMEX hastheright torequire additional information. Inthecaseofdoubt about the
legality oftheorigin oftheobject(s) EMEX isrequired toinform thepolice. Intheterritory ofEstonia
onlyEMEX maypurchase metal scrap from thelegalpersons upon thesubmission ofadeclaration
bythatlegalperson covering theregistration number andother relevant dataabout thelegalperson,
thename andtheposition oftheperson fulfilling thedeclaration, thedate, thekindandamount of
metal aswellasinformation about theorigin ofthemetal. Thedeclaration mustbecompiled onthe
official paper ofthesubmitting legalperson anditmust carry thesignature oftheleader aswellas
thestamp ofthelegalperson. Thepurchase istobedocumented byasale-purchase agreement inthree
copies -twoofthem aretobemaintained bythebuyer. EMEX isrequired todemand documented
records oftheactual activities oftheselling legalperson from elsewhere aswellasdemand thatthe
legalperson beregistered asaVAT subject withtheTaxation Board.
Inthecasetheorigin ofthemetal from alegal person cannot bedeclared duetolackof
information EMEX mustdemand additional documentation -incaseofdoubt about theevidence the
police must beinformed.
In1996EMEX exported scrap metal forthetotalvalue ofEEK 7,984,000. Thisyearthesame
figure isEEK 5,494,000.
3. Internal Policies Affecting Foreign Trade inGoods
Question 26.
Wereserve onwhether theactivities oftheInnovation Fund need further review assubsidies.
Reply:
Adraftnotification oftheInnovation Fund under Article 8.3oftheAgreement onSubsidies
andCountervailing Measures isbeing circulated asdocument WT/ACC/EST/20.
Technical Barriers toTrade, Sanitary andPhytosanitary Measures
Question 27.
What isthestatus ofthedraft legislation referred toinparagraphs 84to86?Weneedtoreview
it,inparticular thatwhich makes useoflicences. Wewould liketoseeinformation onthelicensing
aspect ofthissystem intheformat ofthequestionnaire inWT/ACC/EST/9.
Reply:
Thetranslated textoftheDraft LawonStandardization isavailable forconsultation inthe
Secretariat (Accessions Division, Room 1126).WT/ACC/SPEC/EST/3
Page16
State-Trading
Question 28.
Inthesection onprivatization, Estonia estimates that10percentofitsindustrial enterprises have
notbeenprivatized. Could Estonia discuss these firms? What dotheyproduce? Why arethey
left? Areanyofthem likely tostayingovernment ownership?
Reply:
These 10percentarealsodestined forprivatization andtheyconsist notofindustry inparticular
butrather ofthegreatinfrastructure operators plusthefirms notprivatized duetolimitations inEstonian
Privatization Agency ’stechnical capacity andthefirms notattractive enough forprivate capital tobuy.
Theprivatization perspectives of1997 include thefollowing:
Themostimportant partoftheprivatization programme for1997istoprepare Eesti Energia,
Eesti Põlevkivi, andtheoperational parts ofEstonian Railways forprivatization andtoprepare for
theprivatization ofland. Estonia isinaprocess offorming appropriate policies forthedevelopment
ofkeyinfrastructure sectors. Aneffective regulatory framework forestablishing prices forboth
electricity andoilshalemustbecreated. Theaimistocreate amechanism which establishes anobjective
andtransparent standard forratesetting thatcanbeevaluated byprospective buyers. Taking intoaccount
thecomplexity ofthisissueitisunlikely thatEestiEnergia andEestiPõlevkivi willbeprivatized before
1998.
Thefollowing firms havebeensoldorwillbesoldin1997:
- ASEesti Metallieksport (Buying, processing andselling scrap metals andmetal waste);
- RASAutotranspordi Õppekeskus (Training courses fortruck andbusdrivers);
- RASEstimpeks 51percentofshares (Intermediation activities);
- RASTartu Autoremonditehas (Production oftrailers andsemi-trailers, carengine repairs);
- RASMeie Meel (Publishing thenewspaper Meie Meel);
- RASBIT(Publishing brochures, printing matter);
- RASEesti Konjunktuuriinstituut (Macro-economical market research);
- RASKommunaalprojekt (Construction design);
- Rahva Raamat (Abookstore);
- RASLogistikaMaja(Logisticalprojectsfortransportcompanies,softwarerequiredforlogistics);
- ASAutopark Metra (Transport services ontheisland ofSaaremaa, maintenance andrepair
ofvehicles);
- ASGrid-Emerek (Catering ships);
- RASJärvamaa Takso- jaBussikeskus (Public transport oftheJärva County);
- RASHiiumaa Reisijateveokeskus (Passenger transport ontheisland ofHiiumaa);
- RASPõlvaReisijateveod (Passenger transport ofthePõlvaCounty);
- RASTranspordi Infokeskus (Transport oriented press);
- ASMaseko-Nord (Fish products);
- ASHTM Sport (Production ofwinter sports equipment);
- ASSaku Linnas (Malt production).
Question 29.
Estonia included twofirms, Eesti Energia andEesti Põlevkivi, initsidentification ofState-trading
enterprises. Intheprice control section, itisnoted thattheirenergy salesareunder price control.WT/ACC/SPEC/EST/3
Page17
Willthese firms, which havetheunique benefit ofgovernmental price protection, benotified along
withthestate-trading monopoly ofscrap metal? Ifnot,whynot.
Reply:
There isnobenefit ofgovernmental price protection forEesti Energia andEesti Põlevkivi;
instead therearethelimits forthemaximum pricethattheycancharge fromtheirclients, inaccordance
withtheorder established bytheGovernment. Themonopoly fortrade inscrap metal ASEesti
Metallieksport hasbeenprivatized. Since itisunlikely thatEesti Energia andEesti Põlevkivi will
beprivatized before 1998, Estonia would takeacommitment tonotify these enterprises under
Article XVII oftheGATT 1994uponaccession totheWTO unless thesetwoenterprises areprivatized
bythen. Meanwhile Estonia ispreparing draftnotifications onthecurrent status ofthese enterprises
forreview oftheWorking Party.
4. Agricultural Policies
Question 30.
Could Estonia include inthetextwhat measures theGrain Lawwilleliminate?
Reply:
Estonia assures thatamendments totheGrain Lawwilleliminate thepossibility tousequotas
torestrict imports when domestic demand isfullycovered bylocalproduction. Estonia willprovide
thetranslated textoftheGrain Lawby1September 1997. ThedraftLawonAmendments oftheGrain
Lawwillbeprovided assoonaspossible.
Question 31.
Wewould liketoseeacopy oftheFood Lawdraft.
Reply:
Ithasbeendecided thatthefoodlicensing willnotbeprescribed bythelaw. Paragraph 4
ofArticle 4oftheLawonFoodstates thattheGovernment should enforce theorder ofissuing oflicences
forfoodhandling. Thislegalactwillbedrafted bytheendof1997 anditwillprobably come into
force inthebeginning of1998. Asthedrafting isnotyetcompleted itisunfortunately impossible
toprovide thetranslated textatpresent stage. Estonia confirms thattheprinciples stated inparagraph 99
willbethebasis forthedrafting oftheabove-mentioned decree.
Question 32.
Wecannot agree tothecontent ofparagraph 100. Weobject totheinclusion ofadiscussion on
agricultural export subsidies (paragraph 101)intheWorking Party Report. These issues willbe
addressed intheAgricultural Country Schedule developed forEstonia.
Reply:
Estonia cannot agree withthemodifications inparagraph 100.WT/ACC/SPEC/EST/3
Page18
Transparency
Notification
Question 33.
Please indicate howandwhytheLawontheInnovation Fund should benotified. Ifitisasubsidy,
itshould beaddressed inthatsection. Inaddition, wewould liketoseethetraditional language
onnotifications incorporated withtherestofthecommitment. Wereserve onthisparagraph
until thesituation ontheInnovation Fund isclarified.
Reply:
Adraftnotification under Article 8.3(non-actionable subsidies) oftheAgreement onSubsidies
andCountervailing Measures isbeing circulated asdocument WT/ACC/EST/20.
TRADE AGREEMENTS
Question 34.
Please up-date theinformation contained inparagraph 126.
Reply:
“Therepresentative ofEstonia saidthat1994 FreeTrade Agreement between Estonia, Latvia and
Lithuania didnotcover HSChapter 1to24,butanagreement covering trade infarmproducts has
entered intoforce on1January 1997. Henoted thatEstonia hadthepossibility, untiltheendof1997,
toregulate agricultural imports withtariffs under theFreeTrade Agreement withtheEuropean Union.
Should Estonia apply import duties inthefuture, heconfirmed thatpreferential treatment would only
beaccorded inthecontext offreetradeagreements asprovided forinArticle XXIV oftheGATT 1994. ”