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TWN Info Service on WTO and Trade Issues  (Sept10/02)
14 September 2010
Third World Network

EC duties on high-tech products ruled WTO-illegal
Published in SUNS #6988 dated 31 August 2010

Geneva, 30 Aug (Kanaga Raja) -- A dispute panel of the World Trade Organization (WTO) has handed down a ruling that the tariff treatment by the European Communities(EC) and its Member States of certain information technology products from the United States, Japan and Chinese Taipei are inconsistent with the EC's WTO obligations.

In a ruling issued on 16 August, the panel requested that the European Communities bring the relevant measures into conformity with its obligations under the GATT 1994.

The disputes were brought in 2008 by the United States, Japan and Chinese Taipei against the EC over new duties (between 6% to 14%) that it imposed on imports of high-tech products that are covered by the Information Technology Agreement (ITA).

The products include set-top boxes, flat panel monitors and certain computer printers with scanning and faxing functions.

According to the United States, global exports of these products were estimated at over $44 billion in 2009.

In a press release, the Office of the US Trade Representative (USTR) said that the panel report helps ensure that US producers of high-tech products will continue to be able to export those products to Europe duty-free as guaranteed by commitments made by the European Union following the WTO Information Technology Agreement.

"This is an important victory for US technology manufacturers and workers, as well as the millions of consumers who use these products every day at work and at home, and a prime example of how USTR and the Obama administration are enforcing trade agreements that are vital to US interests," said USTR Ron Kirk.

"This ruling affirms the principle that changes in technology are not an excuse to apply new duties to products covered by the Information Technology Agreement. Technological innovation drives economic growth and improves living standards for working families and consumers in all countries. The high-tech sector is a vital part of our economy and has played a leading role in many states' economic growth," he added.

According to the press release, these products were included in the ITA, a major achievement of the post-Uruguay Round WTO that resulted in the elimination of duties on a wide range of high-tech products that Americans use everyday, such as computers, peripherals, and telecommunications products.

The EU claimed that it could charge duties on them simply because they incorporate newer technologies or additional features. In effect, the EU is taxing innovation - a move that could impair continued technological development in the information technology industry and raise prices for millions of businesses and consumers, said the press release.

In their disputes, the US, Japan and Chinese Taipei argued that the EC's tariff treatment of certain information technology products goes against its commitments to provide duty-free treatment for these products pursuant to the ITA.

In a background to the dispute, the panel noted that the complaining parties claim that the European Communities is required to accord duty-free tariff treatment to certain information technology products - certain "flat panel display devices" (FPDs), "set-top boxes which have a communication function" (STBCs) and "multi-functional digital machines" (MFMs).

The complaining parties also claim that the European Communities is obliged to grant such duty-free treatment under the European Communities Schedule of Concessions to the GATT 1994 (the EC Schedule) pursuant to modifications therein to reflect the commitments it has made under the Ministerial Declaration on Trade in Information Technology Products (Information Technology Agreement or ITA).

The measures at issue identified in the disputes are:

-- In respect of FPDs: Council Regulation (EC) No. 493/2005 of 16 March 2005; Commission Regulation (EC) No. 634/2005 of 26 April 2005; Commission Regulation (EC) No. 2171/2005 of 23 December 2005; Council Regulation (EEC) No. 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff, including all annexes thereto, as amended; and Explanatory Notes to the Combined Nomenclature of the European Communities, 2008/C 133/01 (May 30 2008), alone or in combination with Council Regulation (EEC) No. 2658/87 of 23 July 1987.

-- In respect of STBCs: Council Regulation (EEC) No. 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff, including all annexes thereto, as amended; and Explanatory Notes to the Combined Nomenclature of the European Communities, 2008/C 112/03 (7 May 2008), alone or in combination with Council Regulation (EEC) No. 2658/87 of 23 July 1987.

-- In respect of MFMs: Commission Regulation (EC) No. 517/1999 of 9 March 1999; Report of the Conclusions of the 360th meeting of the Customs Code Committee, Tariff and Statistical Nomenclature Section, TAXUD/555/2005-EN (March 2005); Commission Regulation (EC) No. 400/2006 of 8 March 2006; and Council Regulation (EEC) No. 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff, including all annexes thereto, as amended (including amendments adopted pursuant to Commission Regulation No. 1214/2007 of 20 September 2007).

On the issue of FPDs, the United States, Japan and Chinese Taipei requested the panel to find that the European Communities has acted inconsistently with Articles II: 1(a) and II: 1(b) of the GATT 1994 by according certain FPDs treatment less favourable than that provided in the EC Schedule, and by imposing on these products ordinary customs duties, or other duties and charges, in excess of those set forth in the EC Schedule.

On the issue of STBCs, the United States, Japan and Chinese Taipei requested the panel to find that the European Communities has acted inconsistently with Articles II: 1(a) and II: 1(b) of the GATT 1994 by according STBCs treatment less favourable than that provided in the EC Schedule, and by imposing on these products ordinary customs duties, or other duties and charges, in excess of those set forth in the EC Schedule.

The United States and Chinese Taipei further requested the panel to find that the European Communities, with respect to STBCs, has acted inconsistently with Articles X: 1 and X: 2 of the GATT 1994 by not promptly publishing the Explanatory Notes identified above in respect to these products and by applying duties to these products using the approach specified in these Explanatory Notes prior to the date of their publication.

On the issue of MFMs, the United States, Japan and Chinese Taipei requested the panel to find that the European Communities has acted inconsistently with Articles II: 1(a) and II: 1(b) of the GATT 1994 by according certain MFMs treatment less favourable than that provided in the EC Schedule, and by imposing on these products ordinary customs duties, or other duties and charges, in excess of those set forth in the EC Schedule.

On the complaint by the United States, the panel found amongst others that in the absence of the duty suspension under Council Regulation No. 179/2009, the measures direct national customs authorities to classify some flat panel display devices that are capable of receiving and reproducing video images both from an automatic data-processing machine and from a source other than an automatic data-processing machine, that fall within the scope of the FPDs narrative description and/or within the scope of the CN code 8471 60 90, under dutiable headings.

Because the concessions call for duty-free treatment of products falling within their scope, this dutiable treatment is inconsistent with Article II: 1(b) of the GATT 1994.

The panel made a similar finding with respect to some flat panel display devices that have a DVI interface, whether or not they are capable of receiving signals from another source, that fall within the scope of the FPDs narrative description and/or within the scope of the CN code 8471 60 90, under dutiable headings.

The panel further found that the European Communities failed to accord treatment no less favourable than that set forth in its Schedule to the commerce of the other WTO Members, in particular certain flat panel display devices that are capable of receiving and reproducing video images both from an automatic data-processing machine and from a source other than an automatic data-processing machine, or that have a DVI interface, whether or not they are capable of receiving signals from another source.

Thus, it said, the European Communities is inconsistent with Article II: 1(a) of the GATT 1994.

The panel found that the measures (with respect to STBCs) direct national customs authorities to classify under dutiable headings some set top boxes which incorporate a device performing a recording or reproducing function and retain the essential character of a set top box and that fall within the scope of the STBCs narrative description in the Annex to the EC Schedule.

Because the concession calls for duty-free treatment of products falling within its scope, this dutiable treatment is inconsistent with Article II: 1(b) of the GATT 1994.

The panel made a similar finding with respect to some set top boxes which utilise ISDN, WLAN or Ethernet technology, and that fall within the scope of the STBCs narrative description in the Annex to the EC Schedule.

The panel however found that the US had failed to meet its burden to establish a prima facie case that the products at issue fall within the scope of concessions arising under CN codes 8517 50 90, 8517 80 90, 8525 20 99, and/or 8528 12 91 of the EC Schedule. Therefore, the US had failed to establish that the measures are inconsistent with Articles II: 1(a) and II: 1(b) of the GATT 1994 because the concessions require duty-free treatment for the products falling within their scope.

With respect to MFMs, the panel found amongst others that the regulation requires dutiable treatment of certain ADP MFMs that fall within the scope of the concession for "input or output units" in HS1996 subheading 8471 60 of the EC Schedule. Because the concession calls for duty-free treatment of products falling within its scope, this dutiable treatment is inconsistent with Article II: 1(b) of the GATT 1994.

The panel made a similar finding with respect to certain non-ADP MFMs that fall within the scope of the concession for "facsimile machines" in HS1996 subheading 8517 21 of the EC Schedule.

Pursuant to Article 19.1 of the DSU, having found that the European Communities has acted inconsistently with Articles II: 1(a), II: 1(b), X: 1, and X: 2 of the GATT 1994, the panel recommended that the Dispute Settlement Body request the European Communities to bring the relevant measures into conformity with its obligations under the GATT 1994.

The panel recalled that the EC had indicated that the Commission Regulation Nos. 634/2005 and 2171/2005 would be repealed. In addition, the EC had indicated that Commission Regulation Nos. 517/1999 and 400/2006 would be repealed as of October 2009.

However, said the panel, there is no evidence properly before the panel confirming such repeal. Therefore, the panel said that it has proceeded on the basis that the said measures are in force.

As with the US complaint, the panel made broadly similar findings vis-a-vis the complaints of Japan and Chinese Taipei. +

 


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