Earlier this week, India proposed the World Trade Organization (WTO) to end its e-commerce moratorium and allow developing countries, like itself, to impose customs duties on computer-aided design, or CAD files, which are the basis for 3D printing. It pitched for the consent to tax electronic transmissions which, at present, are immune from taxation.
Current Round of Discussion on Imposing Customs Duty on Computer Aided Design
The current round of arguments is conducted after the WTO members, in December 2019, decided to extend the moratorium on e-commerce transmissions from the imposition of customs duties by six months till June.
These propositions come after recent paper by the United Nations Conference on Trade and Development (UNCTAD) cautioned that the implications of the moratorium go much beyond customs tariff revenue losses for developing countries due to the advancement of new digital technologies like 3D printing.
According to the same paper, India’s potential revenue loss due to non-taxing of electronic transmissions was pegged at around $500 million per year. India’s proposal is crucial in the wake of 13 members — including Australia, Canada, South Korea, New Zealand and Singapore — opposing any such tax in their recent proposal submitted last month.
India’s Argument on Imposing Customs Duty on Computer Aided Design
As the world is rapidly adopting new digital technologies like 3D Printing, products can now be manufactured from anywhere around the globe simply by sharing a CAD file. If such CAD files originating from developed countries are sent to developing nations like India to 3D print products, then this act will lead to “disruption in traditional manufacturing, resulting in job losses and declining incomes” and more so in sectors such as textiles and clothing, footwear, auto-components, toys, mechanical appliances and hand tools,
India is strongly supported by South Africa and both have been vociferous in their argument that the e-commerce moratorium has led to loss of revenue and had taken away policy space from developing countries.
Earlier this week, at the WTO’s General Council meeting, India said, “An important policy instrument available for this purpose would be to impose customs duties on CAD files necessary for 3D printing.”
Last year the Organisation for Economic Co-operation and Development (OECD) released a study to shed new light on the e-commerce moratorium debate, where it argued that such technologies such as 3D printing are unlikely to have far-reaching implications on trade in the near term and so there is no reason to moratorium.
India has unequivocally rejected their proposal and has countered the OECD argument with facts from recent studies stating that if current growth of investments in 3D printing continues, 50% of the manufactured goods will be ‘3D printed’ in 2060 and if investments in 3D printing doubles, this target will be achieved in 2040.
India concluded, “This will wipe out almost 40% of cross-border physical global trade.”
Finally, India explicitly mentioned that not all software would fall within the scope of the moratorium as some of them could be delivery of services through Mode 1 or cross-border supply. It also emphasised that removal of the moratorium does not mean countries will necessarily impose customs duties across the board.
What’s Next on Imposing Customs Duty on Computer Aided Design
The United Nations Conference on Trade and Development (UNCTAD) has publicly favoured India’s stance of ending e-commerce moratorium. While some developed countries oppose India and South Africa’s argument to impose customs duty on computer aided design files.
Critics of the UNCTAD report suggest that the model is based upon unrealistic scenarios and provides an exaggerated view of the loss of revenue.