RESTRICTED
WORLD TRADE WT/ACC/MNG/9
27June1996
ORGANIZATION(96-2472)
REPORT OFTHE WORKING PARTY ONTHE
ACCESSION OFMONGOLIA*
1. Atitsmeeting on8October 1991, theCouncil ofRepresentatives appointed aWorking Party
toexamine theapplication oftheGovernment ofMongolia toaccede totheGeneral Agreement under
Article XXXIII, andtosubmit totheCouncil recommendations which might include adraftProtocol
ofAccession. In1995theGovernment ofMongolia advised thatithaddecided tonegotiate theterms
ofaccession ofMongolia totheAgreement Establishing theWorld Trade Organization (hereinafter
referred toasthe"WTO") under Article XIIoftheAgreement. Inpursuance ofthedecision adopted
bytheGeneral Council on31January 1995, theWorking Party ontheAccession ofMongolia tothe
GATT 1947 wastransformed intoaWTO Accession Working Party.
2. TheWorking Party meton3-4June1993, 1-2February, 24-25 May, 3-4November 1994
and26June1996 under theChairmanship ofH.E. Mr.W.Lang (Austria). Theterms ofreference
andthemembership oftheWorking Party aresetoutindocument WT/ACC/MNG/1.
3. TheWorking Party hadbefore it,toserve asabasis foritsdiscussions aMemorandum on
theForeignTradeRegimeofMongolia(L/6943andAdd.1-2),andthequestionssubmittedbyMembers
ontheMongolian foreign trade regime together withthereplies oftheMongolian authorities thereto
(L/7043/Rev.1 andSpec(93)28). Inaddition therepresentative ofMongolia made available tothe
Working Party thefollowing material:
-LawonForeign Investment;
-Partnership andCompany Law;
-Banking Law;
-LawonPrivatization;
-General LawofTaxation;
-Personal Income TaxLaw;
-Economic Entity andOrganization Income TaxLaw;
-Transport Facilities andVehicle TaxLaw;
-Sales TaxLaw;
-Bankruptcy Law;
-LawontheProtection ofConsumers 'Rights;
-Customs Law;
*ThisReport hasbeenadopted bytheWorking Party onanadreferendum basis.WT/ACC/MNG/9
Page2
-LawonProhibiting Unfair Competition;
-Copyright LawofMongolia;
-Basic statistical dataonMongolia 'seconomy;
-Basic statistics onMongolia 'sforeign trade;
-International intergovernmental andspecialized organizations where Mongolia isamember;
-Main international treaties, conventions andagreements related totrade andeconomic co-operation
where Mongolia isasignatory;
-Listofcountries withwhich Mongolia hasbilateral trade agreements;
-Listofcountries withwhich Mongolia hasconcluded agreements onavoidance ofdouble taxation
andmutual promotion andprotection ofinvestments;
-Information onmain service sectors (Spec 94(43));
-Notification onImport Licensing Procedures (WT/ACC/MNG/1);
-Notification onTechnical Barriers toTrade (WT/ACC/MNG/2);
-Notification onCustoms Valuation (WT/ACC/MNG/2);
-Information onState Owned Enterprises (WT/ACC/MNG/2);
-Information onState Trading Enterprises inMongolia (WT/ACC/MNG/6);
-Information onCompany LawinMongolia (WT/ACC/MNG/4);
-Information onIntellectual Property Rights (WT/ACC/MNG/4);
-ListofItems subject toLicensing (WT/SPEC/30);
-ListofItems subject toquality certificates (WT/SPEC/31);
-Draft Notification onSanitary andPhytosanitary Measures (WT/SPEC/34&36);
-Draft Notification onCustoms Valuation (WT/SPEC/37); and
-Draft Notification onTechnical Barriers toTrade (WT/SPEC/38).
4. Inanintroductory statement, therepresentative ofMongolia saidthatthelastfiveyears had
marked rapid andchallenging changes inthepolitical andeconomic lifeofMongolia. Formerly a
country closed tointernational relations andheavily dependent ontheCMEA member countries, in
1990Mongolia hadinitiated anin-depth reform process aimed atrestructuring thecountry 'seconomy.
Theprogramme hadbeenrelatively successful astheinflation ratehaddeclined from 321percent
in1992to183percentin1993andtheaverage monthly inflation ratehadfallen further to3.6percent
in1995. Moreover, theconsumer rationing system hadbeenabolished. Thefloating exchange rate
wasrelatively stable ataround 450tugrigs perUSdollar in1995. Since 1990 Mongolia hadentered
intotrade agreements withmany countries. Mongolia hadsigned agreements onmutual protection
andthepromotion ofinvestments aswellasarrangements ontheavoidance ofdouble taxation with
alargenumber ofcountries. Mongolia alsohadjoined international economic andfinancial institutions,
suchastheWorld Bank, IMF, ADB, CCC andsigned theConventions onMIGA, Harmonized System,
Settlement ofInvestment Disputes. Mongolia hadoverhauled theexisting legislation tomake it
responsive tothemarket economy system. ThePrivatization Law, thePartnership andCompany Law,
theBanking Law, theBankruptcy Law, theLawonProtection ofConsumers 'Rights, theLawon
Securities, theForeign Exchange Law, theLaw onQuality andStandardization, theLaw on
Environmental Protection, theLawonMinerals, thePatent Law, theCopyright Law, theLawonFair
Competition, Laws onTaxation andtheForeign Investment Lawhadbeenenacted among others.
Thepolicy ofencouragement oftheprivate sector hadledtotheprivatization ofmore than88percentWT/ACC/MNG/9
Page3
oftheformer Stateowned enterprises through investment coupons. Almost 90percentofthelivestock
andthenetwork ofsmall retail shops, outlets andenterprises incatering andservice business hadbeen
transferred toprivate ownership. Prices ofheating, coal, andelectricity forhousehold consumption
andpublic transport faresweresubject togovernment control. Thetraderegime wasbeing liberalised
gradually. Anybusiness entity wasentitled toconduct foreign trade transactions without special
authorization. Quantitative restrictions werenotimposed oneither exports orimports. Export licensing
wasrequired forcertain specific articles likepalaeotological andarchaeological finds, guns, weapons,
blood andblood products andradio-active elements. Import licences were required onlyforitems
suchasweapons, ammunition, explosives, etc.Asapartoftheforeign exchange reforms, afloating
exchange ratehadbeenapplied fromtheendofMay1993. TheHarmonized Commodity Description
andCoding System wasbeing usedasamodel tocollect statistical dataontheexportation and
importation ofgoods andMongolia expected toapply itfullyin1996. Thecustoms valuation rules
werebased ontheGATT Customs Valuation Code. Hestressed thathisGovernment expected that
theaccession ofMongolia totheWTO would contribute tothefurther economic development and
integration ofMongolia intheinternational trading system andwould bemutually beneficial toall
countries. Headded thatMongolia wasready toenter intomarket access negotiations ongoods and
services withallinterested Members. Having regard totheMinisterial Decision of14April 1994
onAcceptance ofandAccession totheAgreement Establishing theWorld Trade Organization (WTO)
andtotheDecision ofthePreparatory Committee dated 31May1994, theMongolian Government
hadintended toaccept theAgreement Establishing theWorld Trade Organization andbecome anoriginal
member thereof. Forthispurpose Mongolia hadtabled draftmarket access schedules foragriculture
andindustrial goods andforservices. Duetothecomplexity ofthenegotiating process, forreasons
independent ofMongolia, thisobjective hadnotbeenattained. Therefore, in1995, theGovernment
ofMongolia hadapplied foraccession totheWTO Agreement inpursuance ofArticle XIIthereof and
theWorking Party onAccessions toGATT 1947hadbeentransformed intoaWTO Accession Working
Party. Healsostated thatasadeveloping country Mongolia reserved therighttoinvoke thespecial
provisions concerning developing countries contained intheMultilateral Trade Agreements.
5. TheWorkingPartywarmlywelcomedMongolia'sinitialapplicationforaccessiontotheGeneral
Agreement andlaterontotheWTO. Inexpressing appreciation andunderstanding forMongolia 's
ongoing political andeconomic reforms, themembers oftheWorking Party noted thatnotwithstanding
thesmall sizeoftheinternal market, alandlocked situation, alowlevelofinfrastructure, theshortage
offinancial resources andthecollapse oftraditional financial andeconomic links, Mongolia hadthe
courage tomaintain asteady course tobring about socially acceptable reforms. Members commended
Mongolia 'smeasures aimed atconsolidating ademocratic society andimplementing afullmarketWT/ACC/MNG/9
Page4
economy. Members noted thatMongolia hadestablished anewlegalandinstitutional framework for
theeconomy andforforeign trade, hadliberalized theforeign exchange regime, hadfreed most prices,
hadmade substantial progress intheprivatization oftheproductive sectors andhadmade afirm
commitment tocontinue topursue political, economic andsocial reforms. Intheirview, Mongolia 's
accessiontotheWTOwouldcontributetoalleviatingthecurrentdifficulties,wouldpromotethecountry's
economic development, andhelptoattract foreign investment andwould alsocontribute tostrengthening
ofthemultilateral trading system.
6. TheWorking Party carried outanexamination ofthevarious aspects oftheMongolian foreign
traderegime andthepossible terms andconditions ofaprotocol ofaccession. During thisexamination
thedelegationofMongoliaprovidedadditionalinformationon,andclarificationof,Mongolia'seconomic
andcommercial policy. Themainpoints brought outinthediscussions aresetoutbelow inparagraphs 7
to60.
Economic reforms
7. Inresponse toquestions concerning reforms inthepricing system, theforeign exchange regime
andtheexistence ofmonopolies, therepresentative ofMongolia reiterated thattheGovernment had
beenmovingdecidedlytowardsafullmarketeconomy;therefore,mostpricecontrolshadbeeneliminated
andprice controls remained onlyforthefollowing items: coal, electricity, heating when these were
forhousehold useandpublic transport fares. Allother prices weredetermined bymarket conditions
exclusively. Inaddition, therepresentative ofMongolia recalled thattheexchange ratehadfluctuated
widely intheperiod 1991-1994 going from3to7to42to150to450Tugrigs (Tug) perUnited States
dollar. Thecurrent exchange ratewas450Tugrigs perUSdollar. Even though ithadnotyetbeen
possible toestablish thefullconvertibility oftheTugrig, inMay1993theGovernment hadestablished
afloating exchange ratesystem. TheMongolbank (Central Bank) announced theexchange rateof
theTugrig totheUnited States dollar andother foreign currencies every twoweeks onthebasis of
international market rates. TheMongolbank andtheexisting fourteen commercial banks werepermitted
tobuyandsellforeign exchange atthemarket rate. Thecommercial banks were public limited
companies similar toprivatized enterprises. Asaresult ofthese measures, theparallel exchange rate
haddecreased andsince June1993, asingle exchange ratehadbeenineffect. Access totheforeign
exchange market wasonthebasisofnational treatment without anydiscrimination concerning ownership
ornationalorigin.Finally,therepresentativeofMongoliaconfirmedthatmonopolieswerenotpermitted
inMongolia.WT/ACC/MNG/9
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Tariff Regime
8. Inresponse toquestions concerning thetariff regime, therepresentative ofMongolia saidthat
themultiple customs tariffs which hadoperated prior toJune1991 didnotprovide form.f.n. rates.
Within theframework ofeconomic reforms andtheliberalization oftrade policy andintheprocess
ofintegrating tothemultilateral trading system, Mongolia haddecided tooverhaul theexisting tariff
system whose rateswere15percentformostitems. Asatemporary measure, lower rateswereapplied
toafewitems. Theoriginal uniform tariffrateof15percentwhich hadbeenapproved bytheParliament
wasinforce. TheParliament haddelegated totheGovernment therighttoreduce thetariff rateson
certain basic consumer goods byupto100percent andonindustrial andtechnical goods byupto
50percent. After accession totheWTO, anychanges inbound tariff rateswould comply withthe
relevant obligations. Thetariff schedule under consideration would havedifferent ratesondifferent
goods, would convert Mongolia 'stariffsystem totheHarmonized System andwould introduce general
andm.f.n.tariffrates.Notingthatrevenuefromcustomsdutiesaccountedforapproximately14percent
ofGovernment revenue, therepresentative ofMongolia added thatMongolia wasready toenter into
tariffnegotiations withallinterested members. Some members expressed theviewthatbindings should
beestablished atcommercially significant levels togivesome level ofsecurity ofmarket access to
fellow WTO Members. Therepresentative ofMongolia saidthattaking intoaccount itsownneeds
andtheneeds ofthemembers concerned, hisGovernment hadoffered comprehensive bindings inits
tariffschedule atanacross theboard ratenothigher than30percentwithcertain exceptions. Following
bilateral negotiations withmembers oftheWorking Party, theschedule ofconcessions andcommitments
onmarket access forgoods ofMongolia isreproduced inPartIofAnnex ItotheProtocol ofAccession
ofMongolia.
Other Import Duties andCharges
9. Inresponse toquestions frommembers oftheWorking Party, therepresentative ofMongolia
confirmed thatthere werenoother duties andcharges except customs clearance feesandcharges in
Mongolia. Inclarification ofthatstatement therepresentative ofMongolia saidthatArticle 16ofthe
existing Customs Lawprovided forcustoms feesinconnection withcustoms formalities, services
rendered andcustoms warehouse, theamounts ofwhich were determined bytheCustoms General
Administration.TheCustomsGeneralAdministrationhadestablishedthefollowingcustomsfeesrelating
to:
(a) customs formalities/customs clearance, including filing ofthecustoms declaration forgoods
forimport, export andtransit -2000 tugrigs; andWT/ACC/MNG/9
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(b) customs clearance ofmerchandise atthesiteofandattherequest ofanapplicant -1000 tugrigs
perhour.
Therepresentative ofMongolia considered thatthefeesinsub-paragraphs 9(a)and(b)werefeescovered
byArticle VIIIoftheGATT 1994. Inanswer toquestions, therepresentative ofMongolia saidthat
goods inthecustody ofCustoms warehouses were charged feesof0.3percentadvalorem perday
asapenalty fornon-payment ofcustoms feesandcharges. Thefeeswerenotapplied toallimports,
onlytothose goods inthecustody ofCustoms warehouses.
10. Therepresentative ofMongolia stated thatMongolia would bindimport duties andcharges
other thanthetariffs listed intheSchedules ofConcessions atzeroinaccordance withtherequirements
oftheWTO. Anyother feesandcharges forservices rendered would belimited tothecostofthose
services andwould conform totheprovisions ofArticle VIIIoftheGATT 1994. TheWorking Party
took noteofthese commitments.
Taxation Regime
11. Therepresentative ofMongolia stated thatexcise taxes were applied tothefollowing goods
byHSCode: beers, wine andspirits (2203, 2204, 2205, 2207, 2208); tobacco products (2402);
gasoline anddiesel oil(2710.00). Inthecourse oftheirexamination ofMongolia 'strade regime some
members oftheWorking Party raised concerns thattheexcise taxesapplied toimported liquors, wines,
gasoline, anddiesel oilexceeded those applied todomestic production. Specifically, taxes on
domestically produced alcoholic beverages were80-85 percentandonimports were100-150 percent.
Therepresentative ofMongolia saidthattheexcise taxapplied toimported rectified spirits, andalcoholic
beverages, wines weregreater thanthose applied tolikedomestic goods. TheGovernment ofMongolia
hadreviewed thissituation andagreed thatitwasnotconsistent withArticle IIIoftheGATT 1994
andwithaview toequalizing taxes onimported andlikedomestic product hadmade appropriate
amendments totheexcise taxlawin1994. Thehigher advalorem ratesforimported alcoholic beverages
werereplaced byspecific rates, andtheratesapplied toimported goods wereinsome instances lower
thanthose applied tolikedomestic products. Thespecific rateswereintroduced withaviewtoeasing
thecustoms valuation ofthose products. Thecurrent ratesoftheexcise taxwere asfollows:
1) rectified spirit: domestic -85%advalorem
imported -3000 Tugrigs perlitre
2) alcoholic beverages: domestic -80%advalorem
imported -1500 Tugrigs perlitreWT/ACC/MNG/9
Page7
3) wines: domestic -30%advalorem
imported -200Tugrigs perlitre
4) tobacco products: nodomestic production
imported -100% advalorem
5) gasoline: nodomestic production
imported -15200 Tugrigs perton
6) diesel oil: nodomestic production
imported -17180 Tugrigs perton
Theexcise taxonimports wasapplied from thedateofcompletion ofthecustoms clearance. The
likedomestic products weresubject totheexcise taxfrom thedateofinvoice oftheproduct. Some
members oftheWorking Party were oftheview thatdespite Mongolia 'ssteps towards elimination
ofthedifferential taxation ofdomestic andimported goods, theuseofdifferent bases forcalculation
ofthetaxmade itdifficult orimpossible toascertain whether thetaxtreatment ofimported goods was
consistent withArticle III.Some members stated thatfromthedateofaccession, thesamebase(either
specific oradvalorem) should beusedforbothimported anddomestically produced goods. The
representative ofMongolia stated thatbecause theStateBudget for1996hadalready beenenacted by
theParliament, itwasnotpossible before theendof1996 toalterthebases upon which theexcise
andsalestaxes were calculated.
12. Inresponse toquestions concerning thescope andthelevelofthesalestax,anditsapplication
toimported anddomestically produced goods, therepresentative ofMongolia saidthataccording to
Articles 4,6and8oftheSales TaxLaw, asalestaxof10percentwasapplied tobothimported and
domestically produced goods andservices. Imports weresubject tosalestaxfromthemoment oftheir
importation intotheterritory ofMongolia. Domestically produced goods were subject tothesales
taxupon thepurchase orleaseofthegoods orfromthedateoftheinvoice submitted forthepayment
ofservices rendered. TheState taxation authorities givetodomestic manufacturers ofgoods and
providers ofservices aformal notification requesting them toberegistered assalestaxpayers. An
anticipated taxpayer mustcomplete aspecial formwithin 30daysofreceipt ofthenotification, indicating
totallevelofsalesinthepreceding yearandprojected salesforthefollowing year. Thisprocess of
registration iscarried outannually. Alistofcompanies registered assalestaxpayers waspublished
eachyear. Companies having totalsalesoflessthan5million tugrigs werenotrequired toberegistered,
andthuswereexempted fromthesalestax.Headded thatnotaxesorcharges ofanykindwereapplied
toexports andnocharges were levied fortheacquisition ofexport licenses. Some members ofthe
Working Party stated thattheyconsidered thatMongolia 'sexemption ofthedomestic output ofsmall
firms from application ofthesalestaxwhile allimports were subject tothattaxwithout exception,
constituted abreach ofnational treatment withregard totheapplication ofthattax.WT/ACC/MNG/9
Page8
13. Therepresentative ofMongolia stated thatfrom1January 1997, Mongolia would apply national
treatment withregard totherateofexcise tax(either specific oradvalorem) tobothimports and
domestically produced products ineachofthecategories inparagraph eleven above andtoallother
products. Therepresentative ofMongolia alsosaidthatMongolia would eliminate thediscrimination
against imported products intheapplication ofthesalestaxfrom1January 1997. TheWorking Party
tooknoteofthese commitments.
Non-Tariff Measures
14. Inresponse toquestions concerning import andexport controls, therepresentative ofMongolia
saidthataccording totheGovernment Decree No.86of24May1993, thefollowing items weresubject
toprohibition withrespect totheirimportation intoand/or exportation fromMongolia: (i)narcotics
andappliances fortheirmanufacture anduse(import andexport prohibited); (ii)books, movies, video
tapes, photos, films advocating pornography orviolence (import andexport prohibited); (iii)animals
listed inInternational andMongolian RedBooks andprohibited bythelawsofMongolia forhunting,
trophies andproducts thereof (export prohibited); (iv)goods received under loans andassistance from
international organizations anddonor countries (export prohibited); (v)livestock, animals, birds, and
rawmaterialsofsuchorigin,foetus,embryosthereofandmicroorganismswithoutveterinarycertification
orpermission fromappropriate organizations (import andexport prohibited); (vi)rawcashmere (export
prohibited). Theimportation and/or exportation ofthefollowing items wassubject tolicensing:
(i)historical andcultural property, palaeontological, archaeological discoveries, samples ofsoil,plants
andanimals (export andimport); (ii)precious metals, precious andsemi-precious stones (export);
(iii)ferrous andnon-ferrous metals (export); (iv)weapons, ammunition, theirsparepartsandexplosives
(export andimport); (v)velvet horn, plants listed inInternational andMongolian RedBooks (export);
(vi)radioactive elements, rareelements, chemical elements (export andimport); (vii)breed stock;
(viii) rectified spirits andalcoholic beverages (import).
15. Therepresentative ofMongolia further stated thattheimport licences were non-automatic.
Thescheme oflicensing covered alimited number ofitems andwasjustified toprotect national treasures
ofartistic, historic orarchaeological value, human, animal orplant life,andtocontrol theimports
ofarms andammunition andofother products related toenvironmental, nuclear andsecurity
considerations. TheMinistry ofTrade andIndustry administered thelicensing system. Allbusinesses
incorporated inMongolia wereeligible toimport goods intoMongolia. Alicence could beobtained
within 7daysfrom thesubmission ofanapplication andwasvalid forthree months. Anapplication
foralicence could bemade atanytimeduring theyear. Incertain cases licences mustbeissued priorWT/ACC/MNG/9
Page9
toshipment ofthegoods. Therepresentative ofMongolia confirmed thatexcept fortheitems listed
above, inMongolia allother products andservices could befreely exported and/or imported byall
entities. TheMinistry ofTrade andIndustry wasresponsible forallmatters concerning theexport
andimport policy ofMongolia. Healsostated thatinorder tocomply withinternational undertakings,
theexportofcertaintextilestotheEuropeanCommunitiesmarketwassubjecttoquantitativerestrictions.
16. Therepresentative ofMongolia confirmed thatlicences hadbeenabolished formeat, grains
andfodder. Forimports oflivestock, animals, birds, andrawmaterials thereof, Mongolia accepted
foreign issued veterinary certificates. Products suchasliveanimals, meat, rawmaterials ofanimal
origin andgoods thereof, minerals, wood, etc.werenotsubject toimport licensing andthere wasno
intention ofintroducing suchmeasures inthefuture.
17. Somemembersquestionedwhetherthelicensingrequirementsonferrousandnon-ferrousmetals;
rareelements andchemical elements; breed stock; andrectified spirits andalcoholic beverages would
beconsistent withtheprovisions ofGATT 1994. Therepresentative ofMongolia replied thattheimport
licensing regime inMongolia wasjustified onthegrounds oftheprotection ofhuman, animal andplant
lifeandtheenvironment, andsaidthat,inviewofthelarge number ofproducts involved, areview
byMongolia ofitssystem ofimport licensing onchemicals would require extensive work andtime.
18. Inanswer toquestions, therepresentative ofMongolia saidthattheexport licensing ofbreed
stock wasrequired toprotect thegenetic fundofpureMongolian stock andwasrequired toensure
thecertification ofthetypeofbreed exported. Transformation fromacentrally planned intoamarket
economy, together withliberalisation oftheforeign tradesystem insome instances resulted innegative
effects. Some traders hadimported cheap lowquality, counterfeit goods, especially alcoholic beverages.
Frequent cases ofpoisoning anddeath hadbeenrecorded. Import licensing ofalcoholic beverages
wasnotintended torestrict thequantity orvalue ofimports. Thenumber ofalcohol importers were
notrestricted. Internal saleofimported products wereaccorded thesametreatment withlikedomestic
products andtherewasnodiscrimination withrespect totheorigin oftheproduct. Therepresentative
ofMongolia stated thatthesystem ofpriorauthorization wasrequired onlyfortheimport ofalcoholic
beverages. Alicence fortheimportation ofalcoholic beverages mustbeobtained prior toshipment
ofthegoods toMongolia. Thelicence wasgranted following thegrantofaQuality Certificate inrespect
ofthegoods, pursuant totheprocess described below. Quality Certificates were alsorequired for
domestically produced foodstuffs andalcoholic beverages. Thecertification process wasregulated
bytheLawonStandardization andQuality Certification (1995). Thatlawprovided thatanybusiness
entity could submit anapplication foraQuality Certificate toMongolia 'sStandardizing bodies.WT/ACC/MNG/9
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Article 11oftheLawonStandardization andQuality Certification provided thattheapplication for
aQuality Certificate could bemade onthebasis ofeither thetestresults andrecord ofanauthorized
Mongolian testing laboratory, orinthecaseofimported goods, onthebasis ofaQuality Certificate
granted bytheappropriate authority oftheexporting country. Upon receipt oftheapplication, the
Standardizing bodies would conduct areview ofthetesting results andtherecord oftheauthorized
testing laboratory, orofthecertificate granted bytheappropriate authority oftheexporting country.
Following thatreview, theStandardizing body issued aQuality Certificate orpermitted theuseofa
Conformity Mark inrespect ofthegoods.
19. Therepresentative ofMongolia provided alistbytariff linenumber ofallimported products
subject toprior authorization, inspection andimport licensing including rareandchemical elements,
rectified spirits andalcoholic beverages, indocuments WT/SPEC/30 and31.
20. Therepresentative ofMongolia saidthatMongolia commits that,fromthedateofaccession,
theauthority ofitsGovernment tosuspend imports andexports ortoapply licensing requirements that
canbeusedtosuspend trade intheproducts under license would beapplied inconformity withthe
requirements oftheWTO, inparticular GATT 1994Articles VI,XI,XVIII, XIX, XX,andXXI, and
theMultilateralTradeAgreementsonAgriculture,SanitaryandPhytosanitaryMeasures,ImportLicensing
Procedures, andTechnical Barriers toTrade andthathisgovernment would notmaintain from the
dateofaccession non-tariff import measures, including bans, quotas, permits andlicences, thatcannot
bejustified specifically under WTO provisions. Inparticular, Mongolia would apply thesamecontrols
andrulesregarding technical regulations, standards certification, andlabelling requirements toimported
anddomestic goods, andwould notusesuchregulations torestrict imports. Mongolia would ensure
thatitstechnical regulations, standards, certification, andlabelling requirements arenotapplied to
imports inanarbitrary manner, inawaythatdiscriminates between supplier countries where thesame
conditions apply orasadisguised restriction oninternational trade. Mongolia would alsoensure that
certificationrequirementsareadministeredinatransparentandexpeditiousmanner,andwouldbewilling
toconsult withtheWTO Members concerning theeffect ofthese requirements ontheirtrade witha
viewtoresolving specific problems. Therepresentative ofMongolia stated thathisGovernment would
ensure thatlicensing wasapplied onlywhen necessary toprotect human, animal andplant lifeand
theenvironment. Therepresentative ofMongolia agreed thattheCommittee onImport Licensing would
review thecompatibility oftheproduct coverage ofthelicensing system bynolaterthantwoyears
afterthedateofMongolia 'saccession totheWTO. TheWorking Party tooknoteofthesecommitments.WT/ACC/MNG/9
Page11
21. Therepresentative ofMongolia saidthatfromthedateofMongolia 'saccession totheWTO,
theperiod ofvalidity oftheimport licences would beextended tooneyear. TheWorking Party took
noteofthiscommitment.
Export Incentives andIndustrial Policy
22. Inrelation toexport incentives therepresentative ofMongolia confirmed, furthermore, that
since 1993 theonlyexport incentive orsubsidy inMongolia were established inthenewForeign
Investment Law, which entered intoforce on1July1993. Thatlawestablished asetofincentives
forforeign investment insectors suchasmining, metal processing, machinery andinfrastructure, which
granted (i)partial andfulltaxrelief during a5to10yearperiod, and(ii)taxabatement ina3year
period forforeign invested enterprises which exported more than50percentoftheiroutput. The
representative ofMongolia acknowledged thatthese measures established bytheForeign Investment
Lawwere export subsidies within themeaning ofArticle 3oftheAgreement onSubsidies and
CountervailingMeasuresandasdescribedinthe"IllustrativeList"containedinAnnexIoftheAgreement
onSubsidies andCountervailing Measures, andconfirmed theintention ofhisauthorities thatallsuch
subsidies would beeliminated bynolaterthan31December 2002. However, onbehalf ofhis
government, theMongolian representative reserved therighttorequest theCommittee onSubsidies
andCountervailing Measures foranextension, ifnecessary, ofthephase-out period, consistent with
theprovisions ofparagraph 4ofArticle 27oftheAgreement onSubsidies andCountervailing Measures.
TheWorking Party noted thattheMongolian Schedule ofCommitments onAgricultural Support and
Export Subsidies contained intheSchedule ofConcessions andCommitments onGoods which isto
befound inAnnex IoftheProtocol didnotprovide forexport subsidies.
23. Therepresentative ofMongolia committed thathisGovernment would eliminate bynolater
than31December 2002, preferably inaprogressive manner, themeasures which meetthedefinition
ofaprohibitedsubsidywithinthemeaningofArticle3oftheAgreementonSubsidiesandCountervailing
Measures, i.e.thesubsidies provided under thenewForeign Investment Law, which came intoforce
on1July1993. These include theincentives forforeign investment insectors suchasmining, metal
processing, machinery andinfrastructure, which granted (i)partial andfulltaxrelief during a5to
10yearperiod, and(ii)taxabatement ina3yearperiod forforeign invested enterprises which exported
more than50percentoftheiroutput. Consistent withthisobjective, therepresentative ofMongolia
committed thatthesubsidies granted under thatprogram would notbeextended orrenewed beyond
theircurrentscopeofapplication,andagreedtoprovideexplanatoryinformationinitsannualnotification
ofsubsidies under Article 25oftheAgreement onSubsidies andCountervailing Measures andArticleWT/ACC/MNG/9
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XVI:1 oftheGATT 1994which wassufficiently precise toenable other Members toconfirm thatsuch
programs arebeing eliminated inamanner consistent withthiscommitment. Hefurther confirmed
thatthesubsidy measures listed above would benotified asprovided forintheAgreement onSubsidies
andCountervailing Measures uponaccession, andthatMongolia applied noother subsidies which fall
within themeaning ofprohibited subsidies asdescribed inArticle 3ofthatAgreement, orthatwould
require notification under theprovisions ofGATT Article XVI:1 orArticle 25oftheAgreement.
TheWorking Party tooknoteofthese commitments.
Export Measures
24.Therepresentative ofMongolia alsostated thathisgovernment would maintain theprohibition
ontheexport ofrawcashmere onlyuntil1October 1996, when anexport dutyattherateofnotmore
than30percentadvalorem would beintroduced. Thatexport dutywould bephased outandeliminated
within 10years ofthedateofMongolia 'saccession totheWTO. Therepresentative ofMongolia
alsostated thatexport licensing requirements forferrous andnon-ferrous metals would beremoved
by1January 1997. TheWorking Party tooknoteofthese commitments.
State Trading Enterprises
25. Amember oftheWorking Party referred tothebroader levelofgovernment involvement in
State firms andnoted thatchapter 5ofMongolia 'sEntity Law, i.e.,thechapter applying toState
enterprises, states thattheenterprises established byfinancing from theState centralized funds are
accountable totheGovernment ofMongolia andthecentral agencies authorized byit;theenterprises
established byfinancing fromthelocalbudget resources areaccountable totheappropriate localsupreme
body anditsexecutive branches (Article 39); theenterprise isestablished bythedecision ofthe
Government ofMongolia and/or theauthorized Stateagency. TheDirector manages thebusiness of
theenterprise andisaccountable totheGovernment Department which nominated himorher(Article
42);andtheGovernment ofMongolia andtheauthorized Stateagencies willdecide thequestions of
thereorganization andliquidation oftheenterprise. Headded thatthese provisions clearly indicated
thatMongolian State enterprises were granted exclusive andspecial rights orprivileges inthatthey
weresubject toprovisions ofMongolian lawthatplace theirmanagement, funding andeconomic fate
inthehands oftheGovernment, asituation distinct andmore favourable thenthatapplying toprivately
heldcompanies atthemercy ofthemarket. Inhisview, Mongolia should notify suchenterprises under
Article XVII untilsuchtimeastheyarenolonger subject tothese provisions oftheEntity Law.WT/ACC/MNG/9
Page13
26. Therepresentative ofMongolia stated thataspartofthereforms towards themarket based
economy theBusiness Entity Lawhadbeen adopted in1991. Pursuant tothatlaw,allbusiness
enterprisesweresubjecttoreorganizationintoaformoflegalentity(i.e.partnerships,limitedcompanies,
jointstock companies). ThePrivatization Law, alsointroduced in1991, provided forthephased
privatization ofstate owned assets. Theimplementation ofthese laws ledtothefullorpartial
privatization offormer stateenterprises. Large enterprises weretransformed intojointstock companies
andthesmaller onesmainly intolimited liability companies. In1995theParliament hadenacted the
Partnership andCompany Lawwhich reflected thedevelopments inprivatization andthetransition
process toamarket economy sincetheBusiness Entity Lawentered intoforcein1991. ThePartnership
andCompany Lawwasacompany code, which stipulates theprocedures fortheformation, registration,
andwinding upofacompany. Italsoestablished governing bodies, andspecified rules inrelation
tofinance andcapital andthemanagerial structure ofcorporations. Allbusinesses, whether firms or
corporations were subject tothatLaw.
27. InresponsetoarequestforinformationontheStateownedtradingenterprises,therepresentative
ofMongolia listed thefollowing tenenterprises thatwereStateowned: 1."Petroleumimport" (import
ofpetroleum products); 2.Consumer Goods Import-Export Corporation; 3.Wholesale Company
(supply ofconsumer goods andothers); 4.Wholesale Company ofFood Products (supply offood
products); 5."Coal" Company (export ofcoalandimport ofequipment, spare-parts, rawmaterials
forcoalmining); 6."Energyimpex" Company (import ofenergy equipment, partsforenergy sector);
7."Gobi" Company (export ofcashmere andother products thereof andimports foritsownfactory).
8."Mongolemimpex" Corporation (import andexport ofmedicine); 9."Erdenet" Corporation (export
ofcopper andmolybdenum concentrates andimport ofgoods for"Erdenet" plant); and
10."Mongolrostsvetmet" (export offluor-spar andimport ofgoods foritsownplant). Mongolia did
notconsider purchases bythefirstseven enterprises listed above forthemanufacturing process orfor
resale tobegovernment procurement within themeaning oftheWTO Agreement, nordiditconsider
those firstseven enterprises tobeengaged instatetrading activities because theydidnotenjoy any
exclusive orspecial privileges inthesense ofArticle XVII ofGATT 1994. They were notsubject
toanycontrol bytheGovernment, nortoGovernment directives inrelation totheiroperations. Their
operations werenotfunded bytheStatebudget. Their Directors wereemployed bycontract forafixed
period bythecompany concerned andwerenotgovernment employees. Therepresentative saidthat
onlythelastthree corporations listed above, i.e.:1."Mongolemimpex" Corporation; 2."Erdenet"
Corporation; and3."Mongolrostsvetmet", wereengaged inState Trading pursuant toArticle XVII
ofGATT 1994. Those firms were alsosubject tothePartnership andCompany Law. TheWT/ACC/MNG/9
Page14
representative ofMongolia noted thatMongolia hadsubmitted Information onStateTrading indocument
WT/ACC/MNG/6.
28. Therepresentative ofMongolia saidthattheseven Stateowned butnotStatetrading enterprises
including those covered bythePartnership andCompany Lawhadnoexclusive orspecial privileges,
acted inamanner consistent withtheprinciple ofnon-discrimination andwere treated onthesame
basisasprivate entities without interference fromtheGovernment ofMongolia. TheStateenterprises
were freetopurchase andsellgoods ontheinternational markets andtoacquire imports from any
origin. Hereiterated thatthese enterprises operated solely onthebasisofcommercial considerations,
were subject tocompetition withprivate enterprises, andwould continue tooperate onthese bases
inthefuture. Headded thattheStateenterprises assessed commissions onthefirms thatsoldorbought
goods through them. Business entities were freetocarry outanyforeign trade transactions without
anyauthorization from theGovernment oritsagencies. Nevertheless, some firms, andespecially
nascent firms wereunable tooperate effectively ontheinternational market, because theylacked the
sufficient experience toconduct business inaninternational commercial setting. Asaresult, those
firms approached experienced Stateorprivate enterprises inorder totakethebenefit oftheirsuperior
experience andknowledge ofinternational trade, ortoaskthem toconduct salesormake purchases
ontheirbehalf. Those firms paidanadvalorem commission feeforthatservice. Theamount ofthe
feevaried depending upontheservice rendered. In1994, theforeign tradeturnover hadbeenasfollows:
Stateowned enterprises 60percentandprivate enterprises 40percent. Asofnowthese enterprises
receive neither financial support nordirections from theMongolian authorities.
29. Therepresentative ofMongolia saidthatintheview ofhisGovernment, atthistimeonly
"Mongolemimpex"Corporation,"Erdenet"Corporationand"Mongolrostsvetmet"Corporation,described
inparagraph 27above, wereengaged inStateTrading pursuant toArticle XVII ofGATT 1994. Those
firmswerealsosubjecttothePartnershipandCompanyLaw.TherepresentativeofMongoliaconfirmed
thathisGovernment would apply itslawsandregulations governing thetrading activities ofthese
enterprises inconformity withtherelevant provisions oftheWTO Agreement, inparticular Article
XVII oftheGATT 1994 andArticle VIIIoftheGATS. HealsosaidthatMongolia would abide by
theprovisions fornotification, non-discrimination andtheapplication ofcommercial considerations
fortrade transactions, andthatitwould submit itsnotification under Article XVII atthetimeofits
accession. Therepresentative ofMongolia alsosaidthathisgovernment would apply itslawsand
regulations governing thetrading activities ofStateowned enterprises, andwould otherwise actinfull
conformity withtheprovisions oftheWTO Agreement. TheWorking Party tooknoteofthese
commitments.WT/ACC/MNG/9
Page15
Privatization Programme
30. Noting thatMongolia hadbeenpursuing afarreaching privatization programme andthatmore
than88percentofStateownedpropertyhadbeenprivatizedthroughinvestmentcoupons,somemembers
oftheWorking Party requested information ontheprocedures being followed tocarry outthis
programme intheindustrial andagricultural sector, thebanking sector, etc.aswellasonthelegal
structure andadministration oftheenterprises privatized. Inresponse therepresentative ofMongolia
saidthatasprovided forbythePrivatization Law, allsmall enterprises engaged intrading andservices
aswellasindependent units oflarge enterprises were subject toprivatization under the"Small
Privatization" programme. The"Small Privatization" aswellastheprivatization ofagricultural
cooperatives, Stateandfodder farms through the"Large Privatization" programme hadbeencompleted
toalargeextent byJuly1995. Under the"Large Privatization" 95percentofStateassets hadalready
beenprivatized. Thesecondary market ofsecurities hadbeenopened inAugust 1995 andtheshares
ofenterprises weretraded inthismarket. Privatization ofthesmall enterprises andunitswhich qualified
forthe"SmallPrivatization"programmehadbeencompletedwiththeexceptionofhousingprivatization.
Thesensitive andtime-consuming issue ofprivatization ofhousing units wascurrently under
consideration. Almost allsmall enterprises andunitsqualified forthe"Small Privatization" scheme
hadbeenprivatized bymeans ofinvestment coupons.
31. Asprovided forinthePrivatization Law, thefirststage oftheprivatization programme had
beenthedistribution tothecitizens ofMongolia ofinvestment coupons which hadenabled them to
purchase shares. Eachperson hadbeenentitled toonepinkcoupon forthe"Small Privatization" and
toonebluecoupon forthe"Large Privatization". Thepinkcoupons could betransferred, soldor
purchased through brokers 'agencies ortraded directly between theholders andbuyers. Theblue
coupons werenottransferable. Thepinkcoupons could beusedasaninvestment instrument onlyonce.
Thereafter theywerenolonger marketable. These coupons werevalid fortwoyears. Thecoupons
didnotearninterest. Thesecondary market didnotdealincoupons. Ifthecoupons hadnotbeen
usedwithin thisperiod theycould bereturned totheGovernment andthecharges levied fortheir
acquisition would berefunded.
32. Theenterprises privatized through thedistribution ofinvestment coupons hadbeenconverted
mainly toshareholder companies, whose operations weregoverned bythePartnership andCompany
Law. Themanagement andcontrol ofsuchcompanies werecarried outthrough theGeneral Meeting,
theBoard ofDirectors, theAuditing Board andtheExecutive Director. Thepowers andthefunctions
ofthese bodies werestipulated inthePartnership andCompany Lawandmore detailed authority andWT/ACC/MNG/9
Page16
objectives could beincluded intheArticles ofIncorporation ofthecompany. According totheLaw,
theGeneral Meeting elected andremoved thedirectors andthemembers oftheAuditing Board. The
shareholders were entitled todividends andhadonevotepershare intheGeneral Meeting. The
managerial structure ofthecompanies varied depending onthetypeandsizeofthecompany. Insmall
andprivate companies, thedirectors andtheshareholders wereusually thesame. Thecompanies did
notmake anyspecial payment toStateauthorities, except those related totheiroperations asabusiness
entity suchastaxes, duties andcharges forservices received, asprovided intherespective lawsand
regulations. Aperson holding coupons could become ashareholder either ofasmall private company
under the"Small Privatization" scheme, orofapublic company under the"Large Privatization scheme
bypurchasing shares ofthecompany using those coupons. Suchperson acquired alltherights conferred
bylawonashareholder, including managerial powers. Theshares ofthese companies were traded
inthestock markets runbytheStock Exchange andcould bepurchased byusing national orforeign
currencies orother assets.
33. Therepresentative ofMongolia added thatmore than90percentofthelivestock hadbeen
transferred toprivate ownership. Theagricultural cooperatives, Stateandfodder farms wereoperating
nowasstock companies inwhich theformer members ofsuchcooperatives andfarms heldshares
acquired withtheirinvestment coupons. Stateowned enterprises accounted for60percentofforeign
trade, whilst theprivate sector accounted for88percentofagriculture, 46percentofindustry, 30
percentofservices and40percentofforeign trade.
34. Until theendof1990, theStateBank ofMongolia hadbeenthesingle banking institution and
hadexercised allthebanking functions. With theadoption oftheBanking Lawin1991, atwo-tier
banking system which permitted theestablishment ofcommercial banks operating aspublic companies
hadbeenintroduced. Shareholders ofthose banks were bothState enterprises andbusiness entities
oftheprivate sector. Theshare oftheprivate sector inthecapital ofsome banks waspredominant.
There wasnofixed timeperiod fortheprivatization ofcommercial banks. However, thefurther
privatization ofStateenterprises would simultaneously leadtothegradual privatization ofcommercial
banks. Currently there werefourteen commercial banks outofwhich onewasajointbank, onewasWT/ACC/MNG/9
Page17
Stateowned andtheshareholders ofothers werebothStateenterprises andbusiness entities fromthe
private sector. Thestructure oftheprivatized entities bytheendofJuly1995 wasasfollows:
Table: Mongolia: Number ofprivatized enterprises bysectors.
Bigprivatization Small privatization
Sectors 1 2 3 4Subtotal 5 6 7Subtotal Total
Industry 49 6 82 42 179 80 59 24 163 342
Construction 26 7 53 74 160 58 115 28 201 361
Transport 22 10 24 33 89 48 23 80 151 240
Telecom 1 1 0 1
Trade and
Service37 5 14 92 148 316 1359 531 2206 2354
Agriculture,
State and
fodder farms42 27 30220 319 7 44 44 95 414
Other 19 6 25 68 118 96 160 166 422 540
Total 195 62 228 529 1014 605 1760 873 3238 4252
*Footnotes
1. Majority State owned
2. Partly State owned
3. Share holding companies
4. Limited Liability Companies
5. Limited Liability Companies
6. Partnerships
7. Proprietorships
AsaresultofprivatizationthroughinvestmentcouponstheprivatesectorofMongoliaproduced63.7per
centofGDP in1994.
35. Attherequest ofamember oftheWorking Party, therepresentative ofMongolia agreed that
itwasimportant toensure fulltransparency andtokeepWTO members informed ofitsprogress in
thereform ofitstransforming economic andtraderegime, andstated thathisGovernment would report
every twoyears totheWTO ondevelopments initsprogramme ofprivatization andonother issues
asrelevant toitsobligations under theWTO. TheWorking Party tooknoteofthiscommitment.WT/ACC/MNG/9
Page18
Investment Regime
36. AmembersaidthattheUnitedStatesandMongoliahadrecentlyconcludedabilateralinvestment
treaty thatwhen ratified would enhance Mongolia 'sattractiveness toforeign investment. However,
thatmember noted thatinthebanking sector andconcerning theownership ofland, national treatment
wasnotguaranteed. Thebanoninvestment intheproduction ofdrugs andother controlled substances
could notbeapplied selectively onlytoforeign investment. Themember noted thatthismaybeacase
where private investment wascompletely prohibited forbothforeign anddomestic private interests,
orasituation where allinvestment applicants require prior government approval which mayormay
notbegiven. Therepresentative ofMongolia stated thatthebanwasapplied toallenterprises operating
inMongolia, irrespective ofthetypeoftheirownership ornationality. Allinvestment intheproduction
ofdrugs andother controlled substances wasprohibited, whether these werestate, private, domestic
orforeign investors.
37. Inresponse toquestions concerning theForeign Investment Law,therepresentative ofMongolia
saidthattherestrictions established bytheGovernment Decree 207hadbeeneliminated. Thenew
Foreign Investment Lawwhich hadentered intoforce on1July1993 wasveryliberal: foreign
investment waspermitted inallsectors withtheexclusion ofactivities related totheproduction ofdrugs
andother similar controlled substances. There hadbeenestablished asetofincentives forforeign
investment insectors suchasmining, metal processing, machinery andinfrastructure, which granted
partial andfulltaxrelief during a5to10yearperiod, andtaxabatement ina3yearperiod forforeign
invested enterprises which export more than50percentoftheiroutput. Thus, Mongolia accorded
toforeign investors bothm.f.n. andnational treatment.
38. Inresponsetofurtherquestions,therepresentativeofMongoliaaddedthattheForeignInvestment
Lawprovided fornon-discriminatory national treatment offoreign invested enterprises andsetno
conditions under which itcould bewithdrawn. TheForeign Investment Lawdidnotlimittheshares
offoreign investors, i.e.theenterprise could bewholly foreign owned andthusalltheprovisions of
theLawapplied tothistypeofforeign invested entities. Foreign firms were alsoabletoinvest in
private enterprises onthesame basis asdomestic investors, there wasnodiscriminatory regulation
inthisrespect. Toconstitute anenterprise withforeign investment theforeign investor should contribute
notlessthan20percentoftheregistered capital. Asmaller participation didnotentitle theforeign
investor tothebenefits andprivileges provided forbytheForeign Investment Law, butasinvestor
theforeign person (whether natural orlegal) wastreated equally withdomestic investors. Under the
existing legislation, foreign investors could invest inanyareaoftheeconomy, therewasnoprohibitionWT/ACC/MNG/9
Page19
orrestriction indicating specific industries orenterprises, except theproduction ofnarcotics which
wasprohibited within theterritory ofMongolia foranyperson regardless ofnationality.
39. Under theLawonGovernment andtheForeign Investment Law, theMinistry ofTrade and
Industry wastheGovernment body responsible fortheexecution offoreign investment policy, and
inparticular established andhandled theapproval procedure forestablishing foreign invested enterprises.
Inpursuance oftheForeign Investment Law, theMinister ofTrade andIndustry hadenacted therules
governing theapproval procedure. Applications forsetting upforeign invested enterprises were
considered bytheMinistry ofTrade andIndustry which reviewed theapplicant 'sfileinterms ofits
compliance withlegislation, impact oftheenterprise onthenatural environment, meeting ofhealth
andsanitary requirements andtheleveloftechnology. Allthese assessments were sought from the
appropriate organizations. TheMinistry ofTrade andIndustry gaveitsruling within 60daysfrom
thedateofreceipt oftheapplication. Iftheapplication wasapproved, theMinistry ofTrade andIndustry
granted acertificate allowing theestablishment oftheforeign invested enterprise. Upon such
authorization, theGeneral Department ofStateTaxation which acted astheRegister ofbusiness entities
performed theautomatic registration oftheforeign invested companies andmade theregistration public.
Actually theapproval procedures forforeign investments anddomestic investments werethesame and
there wasnodiscriminatory treatment offoreign investment. Boththeapproval procedures andthe
registration ofnational companies andenterprises wereperformed bytheGeneral Department ofState
Taxation, whereas theforeign invested enterprises weresubject toapproval bytheMinistry ofTrade
andIndustry.
40. ExemptionsfromcustomsdutiesandsalestaxgrantedtoforeigninvestedfirmsundertheForeign
Investment Lawwerenotconditional andinnowayweredependant onexport performance. Thetax
preferences described inarticle 30oftheForeign Investment Lawwere income taxpreferences and
theydidnotapply tosales, excise orother kindoftaxes. Asindicated above, there wasnorestricted
areaforforeign investment. Foreign insurance firms could operate within theterritory ofMongolia
ifsetuptofunction inaccordance withtheForeign Investment Law. TheForeign Investment Law
didnotcompletely cover allissues related toforeign investments. Some ofthem wereembodied in
other lawssuchasthePartnership andCompany Law, theTaxLaw, theBanking Law, theCustoms
LawandLabour Law. TheParliament hadalsoenacted theLawontheStatus ofForeign Nationals,
theLawonInternational Treaties, theLand LawandtheForeign Exchange Law. Thus other specific
matters related toforeign investment issues were reflected infollow-up statutes. Inthecontext of
economic andforeign trade policy reforms theexisting legislation wasbeing totally overhauled.WT/ACC/MNG/9
Page20
41. TheIncome TaxLawofBusiness Entities defined theforeign invested firms (both wholly and
partially owned byforeign investors) astaxpayers andinthissense extended theexemptions listed
inArticle 7toalltaxpayers (whether foreign investors ordomestically owned entities) whometthe
requirements foreligibility tosuchexemptions. Theright ofestablishment ofbusiness entities in
Mongolia wasopen toallnational andforeign persons whowishtosetupabusiness andhavethe
necessary initial capital required bythelaw.Foreigners could establish companies intheservices area,
forexample accounting firms andtheycould behired as"independent auditors" iftheywere
professionally qualified forthiskindofservice.
42. Therepresentative ofMongolia stated thatMongolia didnotmaintain anymeasure inconsistent
withtheTRIMS Agreement andwould abide bytheTRIMS Agreement from thedateofaccession
without requesting anytransitional period. TheWorking Party tooknoteofthiscommitment.
Customs Procedures andTransparency
43. Amember saidthatMongolia should make acommitment intheProtocol ofAccession tothe
effect thatalltrade related laws, regulations ordecrees ofwhatever character would bepublished for
public review andbefullyaccessible priortoimplementation, andthatnolaws, regulations ordecrees
related tointernational trade would become effective prior tosuchpublication. AllMongolian laws
andregulationswerepublishedintheofficialnewspapersoftheParliamentandtheGovernment,namely:
1."Ardin Erh", theofficial newspaper oftheParliament andtheGovernment published alllawsenacted
bytheParliament; 2."Zasgiin Gazriin Medee", theofficial newspaper oftheGovernment published
alltheDecrees,regulations,orders,etc.adoptedbytheGovernment,Ministriesandgovernmentagencies
andbodies; 3."Turiin Medeelel", aquarterly collection ofthelawsandregulations adopted bythe
Parliament andthePresident; and4."Zasgiin Gazriin Shiidveriin Emhtgel", amonthly collection of
allDecrees andregulations oftheGovernment. Moreover, decisions andregulations issued bythe
General Customs Administration, andother State bodies were alsomade available tothepublic.
44. Therepresentative ofMongolia stated thatfrom thedateofaccession, alllaws, regulations,
ordecrees ofwhatever character related totrade willbepublished promptly prior toimplementation
in"Ardin Erh"theofficial newspaper oftheParliament andtheGovernment or"Zasgiin Gazriin Medee"
theofficial newspaper oftheGovernment insuchamanner astoenable governments andtraders to
become acquainted withthem, andthatnolaw,rule,etc.,related tointernational trade willbecome
effectivepriortopublicationinoneofthoseorgans.TheWorkingPartytooknoteofthesecommitments.WT/ACC/MNG/9
Page21
Customs Valuation
45. Therepresentative ofMongolia stated thathisGovernment 'slawsoncustoms valuation were
infullconformity withtheWTO Agreement ontheImplementation ofArticle VIIoftheGATT 1994,
andthatMongolia would notrequire recourse toanytransitional period forimplementation ofthat
Agreement. Should theservices ofapreshipment inspection firmbeusedtoassist Mongolia inthe
implementation ofitscustoms procedures, theGovernment ofMongolia would ensure thattheoperations
ofsuchfirms wereconsistent withtherelevant WTO Agreements, e.g.onPreshipment Inspection and
Customs Valuation. TheWorking Party tooknoteofthiscommitment.
46. With reference tocustoms practices andprocedures, therepresentative ofMongolia saidthat
hisGovernment would apply customs practices andprocedures inaccordance withtheprovisions of
Articles VII,VIIIandXoftheGATT 1994 andtheWTO Agreement onImplementation ofArticle
VIIoftheGATT 1994fromthedateofitsaccession. BythatdateMongolia would amend anyprovision
oflaworadministrative regulation thatprovided forpractices inconsistent withtheabove-mentioned
provisions. TheWorking Party tooknoteofthese commitments.
Trade Agreements
47. Noting thatsince thecollapse ofthetrade withtheformer CMEA countries Mongolia had
received substantial loans andfinancial assistance from anumber ofcountries andinternational
organizations, therepresentative ofMongolia saidthathiscountry wasready totradewithallcountries
onthebasisofequality andmutual benefit. Currently Mongolia hadsigned WTO consistent agreements
onthebasisofthem.f.n. principle withsome twenty-one countries including Belarus, Canada, China,
Kazakhstan, Republic ofKorea, Russian Federation, Ukraine, United States etc.aswellaswiththe
European Communities. Mongolia supplied theWorking Party withalistofallthecountries with
which ithadentered intosuchagreements. Therepresentative ofMongolia further stated thatMongolia
hadnoagreements withanycountry thatprovided foranyother form ofpreferential tariff orother
treatment intrade, andthatthere arenoagreements thatprovide fortrade inlistsofgoods, whether
indicative ormandatory.
48. Therepresentative ofMongolia stated thatwhen entering intotradeagreements, hisgovernment
would comply withtheprovisions oftheWTO including Article XXIV oftheGATT 1994, paragraph 3
oftheEnabling Clause andArticle VoftheGATS. Mongolia alsowould notify theWTO ofanytradeWT/ACC/MNG/9
Page22
agreements thatprovided forpreferential trade treatment. TheWorking Party tooknoteofthese
commitments.
Multilateral Trade Agreements
49. Therepresentative ofMongolia confirmed thathisGovernment would apply theprovisions
oftheMultilateral Trade Agreements inAnnex 1AoftheWTO Agreement, including theAgreements
onImport Licensing, Standards, Anti-Dumping andSubsidies from thetimeofitsaccession tothe
WTO, andwould minimize totheextent possible recourse tothederogations fromthose Agreements
provided fordeveloping country members. Therepresentative ofMongolia noted thatonemember
oftheWorking Party hadagreed toprovide technical assistance toMongolia inrelation totheapplication
oftheCustoms Valuation Agreement.
FreeZones
50. Therepresentative ofMongolia saidthataspecial lawconcerning freezones wasunder
consideration forthepromotion ofthedevelopment ofcertain backward areas ofthecountry. The
representative ofMongolia stated that,atthepresent time, Mongolia didnotactually haveanysuch
lawsinplace, butafteraccession would induecourse provide information toWTO Members onany
measures adopted onfreezones. Therepresentative added that,uponaccession totheWTO, Mongolia
would comply withalltheobligations applicable tothefreezones. Amember saidthatMongolia should
ensure thatthegoods produced inanysuchzones donotbenefit from subsidies, e.g.income tax
exemptions, arenotsubject toexport performance ortrade balancing requirements; andallsalesof
imported goods from thezones aresubject tothenormal taxandtariff regime when soldintoother
partsofMongolia where thenormal customs regime isineffect. Inthisconnection Mongolia should
make acommitment intheProtocol ofAccession.
51. Therepresentative ofMongolia confirmed that,should Mongolia establish freetrade zones,
iftheoutput ofthesezones willbesoldintotherestofMongolia, Mongolia willapply allnormal taxes,
tariffs,customschargesandotherregulationsonimportstotheproductsortotheirimportedcomponents,
andthatMongolia willobserve theprovisions oftheWTO Agreement onSubsidies andCountervailing
Measures inproviding incentives forestablishment offirms inthefreezones. TheWorking Party
tooknoteofthese commitments.WT/ACC/MNG/9
Page23
TRIPS
52. Inresponse toquestions concerning Mongolia 'slegislation ontraderelated aspects ofintellectual
property rights, therepresentative ofMongolia saidthattheCivil Code ofMongolia recognised both
tangible andintangible property rights, including intellectual property rights. In1993theParliament
hadenacted Copyright andPatent Laws. Under theCopyright Lawworks weresubject toregistration
withanon-governmental agency called the"Copyright Office". Therepresentative ofMongolia also
noted thatMongolia hadprovided information ontheintellectual property regime inMongolia in
document WT/ACC/MNG/4. TheCopyright Lawprotected literary, scientific andartistic creations,
computer programmes aswellassound recordings. ThisLawhadinstitutional provisions andprovided
thelegalstatus andfunctions oftheCopyright Office. TheCopyright Office registered thesubject matter
ofawork andpublished copyright legislation andexercised other functions assetforthinthecopyright
legislation. TheLawgranted theauthor non-property personal rights andexclusive property rights
inrespect ofthework. TheLawalsogranted producers theexclusive righttoreproduce, distribute,
andtopublicly perform theworkinquestion. Works areprotected uponcreation. Thetermofcopyright
ofaparticular work began fromthedayofitsmaking. Thetermoftheexclusive rights incopyrighted
works wasthelifeoftheauthor andfiftyyears afterdeath. Thetermofcopyright ofthelegalperson
lasted foraperiod of75years from thefirstofJanuary oftheyearfollowing theyearofthemaking
ofawork. Incases ofcopyright infringements, civilremedies included injunctions, damages andfines
under Article 224oftheCopyright Law.
53. Trade marks andpatents were registered andlicensed bythePatent Bureau. These entities
werenotdirectly authorized toenforce thelegislation andanyclaims orinfringement cases weresubject
tothejudicial process. ThePatent Lawof1993 gavetotheauthor ofinvention andindustrial design
theright ofownership over hisinvention andindustrial design. TheLawalsoprovided fora
"compulsory license" bywhich thePatent Office could grant acompulsory license tothirdparties if
thepatentee hadnotusedthepatented invention intheterritory ofMongolia within three years from
thedateofgrant ofthepatent, orfouryears from thefiling dateoftheapplication. However, the
MongolianPatentLawprohibitedcertaininventionsfrombeingpatented,includingdiscoveries,scientific
theories andmathematical methods, programs forcomputers andalgorithms, schedules andmethods
fordoing business andplaying games aswellas"immoral" orillegal items. Allpatent applications
weresubmitted tothePatent Office, which conducted anormal examination oftheapplication. The
process tookapproximately 18months anddecisions ofthePatent Office could beappealed totheCourt.
Headded thatMongolia hadtheintention ofacceding inthenearfuture totherelevant intellectual
property conventions.WT/ACC/MNG/9
Page24
54. Therepresentative ofMongolia stated thathiscountry 'slawsinthefieldofintellectual property
rights werealready inconformity withtheprovisions oftheAgreement ontheTrade Related Aspects
ofIntellectual Property Rights (TRIPS), andthatMongolia would fullyapply theprovisions ofthe
Agreement onTRIPS bythedateofitsaccession totheWTO. TheWorking Party tooknoteofthis
commitment.
Services
55. Therepresentative ofMongolia noted thatinformation ontheServices regime inMongolia
hadbeenprovided totheWorking Party indocument Spec94(43). TheBanking LawofMongolia
hadbeenenacted in1991. Thatlawestablished atwo-tier banking system comprising thecentral bank
("Mongolbank") andcommercial banks. Mongolbank wasboththesupreme bankandtheCentral bank,
responsible forsupervision ofoverall banking activity, management offoreign exchange reserves, the
setting ofreserve requirements, andcontrol ofthemoney supply andadministrator offiscal policy.
TheBanking Lawprovided thatacommercial bankcanengage inoneorallofthefollowing activities:
acceptance ofdeposits; lending; guarantees; international payments; purchase andsaleofforeign
currency; issue andsaleofsecurities; andthesafecustody ofvaluables. Commercial banks were
required tohave aminimum capital of400million Tugrigs. Upon therecommendation ofthe
Mongolbank, theGovernment could decide toopenrepresentative offices orbankbranches. Foreign
Banks operating within Mongolia weresubject totheprovisions oftheBanking andother relevant laws.
Commercial Banks could beeither partly orfullyforeign owned. Foreign anddomestically owned
banks weretreated equally under theBanking Law. Foreign owned companies could engage infinancial
consultancy services.
56. Inrelation totheCommunications Sector, theStateowned telecommunications company (MTC)
waspresently thesoleprovider oftelecommunications services, although extensive planning was
underway toupgrade thecurrent system. TheGovernment haddecided to:adopt atelecommunications
lawwhich would open upthesector toforeign competition; toseparate thepostal and
telecommunications functions ofMTC; torestructure andprivatise MTC; toestablish business
partnerships between foreign companies andMTC; toattract greater private-sector participation in
thesector; andtointroduce competition intheprovision ofbasicandvalue-added services inthelonger
term. TheForeign Investment Lawwould ensure favourable taxtreatment forsuchinvestors. Inrelation
totheTransport Sector, Mongolia Railways carried around 70percentofthecountry 'sfreight, as
wellastranshipmentsbetweenRussiaandChina.Italsoconnectedthethreelargestcitiesandtransported
coaltothepower plants inthecapital city. Mongolia Railways wasajointventure between MongoliaWT/ACC/MNG/9
Page25
andtheRussian Federation. Itwasaquasi-independent department oftheMinistry ofInfrastructure
Development. Thepublic trucking industry consisted of43largecarriers. They handled asignificant
share ofintercity freight, aswellasprovided passenger services inruralareas. Allsuchcarriers had
beenprivatized. International flights werecarried outbyMongolian Air.Thestrategy forthetransport
sector wastoimprove theefficiency andcommercial orientation ofthesector. Consistent withthose
goals, fuelprices hadbeenfreed, andurban transport tariffs hadbeenincreased. Foreign investment
inthesector waswelcomed, andwassubject totheprovisions oftheForeign Investment Law.
57. Inrelation totheTourism Sector, around 10,000 tourists peryearvisited Mongolia. Several
large Hotels catered forthose tourists. TheForeign Tourist Corporation ofMongolia nolonger had
amonopoly ontravel arrangements fortourists. Several other private companies nowalsoprovided
similar services. Currently, theestablishment oftravel agencies, andbusinesses todealwithforeign
tourism aresubject toauthorization bytheMinistry ofTrade andIndustry. Therepresentative of
Mongolia stated thatforthepurpose ofaccession totheWTO Mongolia hadnegotiated withthemembers
oftheWorking Party onthebasisofadraftschedule ofspecific commitments intheareaofservices.
58. Mongolia 'sschedule ofspecific commitments intheareaofservices wasannexed toPartII
ofAnnex ItotheProtocol ofAccession ofMongolia.
Government Procurement
59. Therepresentative ofMongolia confirmed thathisGovernment would seekobserver status
intheCommittee fortheAgreement onGovernment Procurement atthetimeofitsaccession with
aview toinitiating negotiations formembership thereafter. TheWorking Party tooknoteofthis
commitment.
Notifications
60. Therepresentative ofMongolia confirmed thatdraftnotifications pursuant toprovisions of
thefollowing Multilateral Trade Agreements hadbeenprepared andcirculated forthereview ofthe
Working Party (seeparagraph 3above) andthatMongolia would submit thefollowing notifications
uponentry intoforce ofitsProtocol ofAccession: Agreement onAgriculture; Agreement onSanitary
andPhytosanitary Measures; Agreement onImport Licensing Procedures; Agreement onthe
Implementation ofArticle VIIoftheGATT 1994; andtheAgreement onTechnical Barriers toTrade.
Headded thatpursuant tothecommitments made inthecourse oftheaccession negotiations referredWT/ACC/MNG/9
Page26
toinparagraph 61below, notifications pursuant toprovisions ofthefollowing Multilateral Trade
Agreements would besubmitted byMongolia uponentry intoforce oftheProtocol ofAccession; the
Agreement onSubsidies andCountervailing Measures, theAgreement onTRIMS, theAgreement on
Implementation ofArticle XVII oftheGATT 1994, andtheAgreement onTRIPS. Healsoconfirmed
thatallother notifications would bemade byMongolia inaccordance withthetimelimits arising from
paragraph 4(b)ofMongolia 'sProtocol ofAccession totheWTO. TheWorking Party tooknoteof
these commitments.
Conclusions
61. TheWorking Party tooknoteoftheexplanations andstatements ofMongolia concerning its
foreign trade regime, asreflected inthisreport. TheWorking Party tooknoteofthecommitments
given byMongolia inrelation tocertain specific matters which arereproduced inparagraphs 10,13,
20,21,23,24,29,35,42,44,45,46,48,51,54,59and60ofthisReport. TheWorking Party
tooknotethatthese commitments hadbeenincorporated inparagraph 2oftheProtocol ofAccession
ofMongolia totheWTO.
62. Having carried outtheexamination oftheforeign trade regime ofMongolia andinthelight
oftheexplanations,commitmentsandconcessionsmadebytherepresentativesofMongolia,theWorking
Party reached theconclusion that,Mongolia should beinvited toaccede totheAgreement Establishing
theWTO pursuant totheprovisions ofArticle XII. Forthispurpose theWorking Party hasprepared
thedraftDecision andProtocol ofAccession reproduced intheAppendix tothisreport, andtakesnote
ofMongolia 'sSchedule ofSpecific Commitments onServices (document WT/ACC/MNG/9/Add.2)
anditsSchedules ofConcessions andCommitments onAgriculture andGoods (document
WT/ACC/MNG/9 Add.1) thatareattached totheProtocol ofAccession. Itisproposed thatthese
textsbeapproved bytheGeneral Council when itadopts theReport. When theDecision isadopted,
theProtocol ofAccession would beopenforacceptance byMongolia which would become aMember
thirty daysafteritaccepts thesaidProtocol. TheWorking Party agreed, therefore, thatithadcompleted
itswork concerning thenegotiations fortheaccession ofMongolia totheAgreement Establishing the
WTO.WT/ACC/MNG/9
Page27
APPENDIX
ACCESSION OFMONGOLIA
Draft Decision
TheGeneral Council,
Having regard totheresults ofthenegotiations directed towards theaccession ofMongolia
totheAgreement Establishing theWorld Trade Organization andhaving prepared aProtocol forthe
Accession ofMongolia.
Decide ,inaccordance withArticle XIIoftheAgreement Establishing theWorld Trade
Organization, thatMongolia mayaccede totheAgreement Establishing theWorld Trade Organization
ontheterms setoutinthesaidProtocol.WT/ACC/MNG/9
Page28
PROTOCOL FOR THE ACCESSION OFMONGOLIA
TOTHE AGREEMENT ESTABLISHING THE WORLD TRADE ORGANIZATION
DRAFT
TheWorld Trade Organization (hereinafter referred toasthe"WTO"), pursuant totheapproval
oftheGeneral Council oftheWTO accorded under Article XIIoftheMarrakesh Agreement Establishing
theWorld Trade Organization (hereinafter referred toasthe"WTO Agreement"), andtheGovernment
ofMongolia, (hereinafter referred toas"Mongolia"),
Taking noteoftheReport oftheWorking Party ontheAccession ofMongolia totheWTO
Agreement indocument WT/ACC/MNG/9 andAdd.1-2 (hereinafter referred toasthe"Working Party
Report"),
Having regard totheresults ofthenegotiations ontheAccession ofMongolia totheWTO,
Agree asfollows:
PartI-General
1. Upon entry intoforce ofthisProtocol, Mongolia accedes totheWTO Agreement pursuant
toArticle XIIofthatAgreement andthereby becomes aMember oftheWTO.
2. TheWTO Agreement towhich Mongolia accedes shallbetheWTO Agreement asrectified,
amended orotherwise modified bysuchlegalinstruments asmayhaveentered intoforce before the
dateofentry intoforceofthisProtocol. ThisProtocol, which shallcomprise thecommitments referred
toinparagraph 61oftheWorking Party Report, shallbeanintegral partoftheWTO Agreement.
3. Mongolia willnotify theSecretariat annually oftheimplementation ofthephased commitments
withdefinitive dates referred toinparagraphs 10,13,20,21,23,24,29,35,42,44,45,46,48,51,
54,59and60oftheWorking Party Report, andwillidentify anydelays inimplementation together
withthereasons therefore.WT/ACC/MNG/9
Page29
4. Except asotherwise provided forinthepreceding paragraph orintheparagraphs referred to
inparagraph 61oftheWorking Party Report:
(a)Those obligations intheMultilateral Trade Agreements annexed totheWTO Agreement
thataretobeimplemented overaperiod oftimestarting withtheentry intoforce ofthat
Agreement shallbeimplemented byMongolia asifithadaccepted thatAgreement onthedate
ofitsentry intoforce.
(b) Those notifications thataretobemade under theMultilateral Trade Agreements
annexed totheWTO Agreement within aspecified period oftimestarting withthedateof
entry intoforce oftheWTO Agreement shallbemade byMongolia within thatperiod oftime
starting withthedateofentry intoforce ofthisProtocol.
PartII-Schedules
5. TheSchedules annexed tothisProtocol shall become theSchedule ofConcessions and
Commitments annexed totheGeneral Agreement onTariffs andTrade 1994 (hereinafter referred to
asthe"GATT 1994") andtheSchedule ofSpecific Commitments annexed totheGeneral Agreement
onTrade inServices (hereinafter referred toas"GATS") relating toMongolia. Thestaging ofthe
concessions andcommitments listed intheSchedules shallbeimplemented asspecified intherelevant
parts oftherespective Schedules.
6. Forthepurpose ofthereference inparagraph 6(a)ofArticle IIoftheGATT 1994 tothedate
ofthatAgreement, theapplicable dateinrespect oftheSchedules ofConcessions andCommitments
annexed tothisProtocol shallbethedateofentry intoforce ofthisProtocol.
PartIII-Final Provisions
7. ThisProtocol shallbeopenforacceptance, bysignature orotherwise, byMongolia until31
December 1996.
8. ThisProtocol shallenter intoforce onthethirtieth dayfollowing thedayupon which itshall
havebeenaccepted byMongolia.WT/ACC/MNG/9
Page30
9. ThisProtocol shallbedeposited withtheDirector-General oftheWTO. TheDirector-General
oftheWTO shallpromptly furnish acertified copyofthisProtocol andanotification ofacceptance
byMongolia thereto pursuant toparagraph 7toeachMember oftheWTO andtoMongolia.
10. ThisProtocol shallberegistered inaccordance withtheprovisions ofArticle 102oftheCharter
oftheUnited Nations.
Done atGeneva this....dayof....onethousand ninehundred andninety six,inasingle copy
intheEnglish, French andSpanish languages, eachtextbeing authentic.WT/ACC/MNG/9
Page31
ANNEX I
SCHEDULE CXXXIV -MONGOLIA
PartI-Goods
Circulated indocument WT/ACC/MNG/9/Add.1.
PartII-Services
Circulated indocument WT/ACC/MNG/9/Add.2