United States is to challenge the EU’s tariff treatment of certain high-tech products before a WTO panel
On 23 September 2008, the WTO Dispute Settlement Body established a WTO panel, requested by United States (“US”), together with Japan and Chinese Taipei, following the failure of formal consultations between the US and European Union (“EU”) in resolving the dispute regarding EU’s imposed tariff policy for several categories of new-generation high technology products. The WTO panel is to determine whether the EU’s tariff policy regarding certain high-tech products is consistent with the tariff concessions made by the EU in the WTO Information Technology Agreement (“ITA”).
In the past several years, the Member States of the EU have ruled, due to amendments of Explanatory Notes to the Combined Nomenclature (“CN”) of the EC, to classify certain high-tech products under CN codes that resulted into new duties of imports for those products, involving duties as high as 14%. This regards in particular the following three high-tech products:
- set-top boxes with a communication function, in other words, cable and satellite boxes that can access the internet;
- flat panel computer monitors, in other words, LCD (computer) monitors; and
- certain multifunctional digital machines, in other words, computer peripherals that can scan, print, copy and/or fax.
EU imports of set-top boxes, LCD computer monitors, and multifunction computer peripherals were valued at more than $11 billion in 2007. Worldwide exports of these products were valued at more than $70 billion and are sold by a wide range of developed and developing countries.
The US companies are some of the largest manufacturers of these high-tech products. The EU abandoned the duty-free treatment of these products and started applying duties simply because these products incorporate technologies or features that did not exist when the ITA was concluded. According to the US, Japan and Chinese Taipei, the EC and its Member States are acting contrary to their scheduled duty-free tariff concessions arising from the ITA.
The ITA is an international agreement of world trade in technology products and is intended to increase trade and competition through the promotion of free trade principles for information technology products. The ITA encompasses binding commitments for the elimination of tariffs on products covered.
With that regard, the US considers that the high-tech products under dispute are included in the ITA.
Specifically, as to printers, the EC's ITA commitments are set forth in ITA Attachment A, Section 1 (HS96 8471.60 "input or output units") and Attachment B ("Network equipment: … input or output units …."). As to facsimile machines, the EC's ITA commitments are set forth in ITA Attachment A Section 1 (HS96 8517.21 "facsimile machines") and Attachment B ("Network equipment: … input or output units ….").  As to LCD monitors, the EC's ITA commitments are set forth in ITA Attachment A, Section I (HS96 8471.60 "input or output units") and Attachment B ("Flat panel displays (including LCD…)...."). As to set top boxes with a communication function, the EC's ITA commitments are set forth in ITA Attachment B ("Set top boxes which have a communication function…").
As stated above, the US characterises these products as being ITA products and, therefore, considers that the EC, in its Schedule of Concessions to the GATT 1994 (“Schedule”), and its Member States, in their Schedules of Concessions to the GATT 1994, committed to provide duty-free treatment for these products. The EC and its Member States granted the tariff concessions as a result of the ITA.
However, the EC and its Member States do impose duties on these products. The measures taken by the EC pursuant to which the duties on the mentioned products are imposed, can be viewed in detail at http://docsonline.wto.org/imrd/gen_searchResult.asp?RN=0&searchtype=browse&q1=(@meta_Symbol+WT%FCDS375%FC1)&language=1.
As an example, the adopted measures by the EC and its Member States resulted, in relation to LCD monitors, to the establishment of CN codes 8528.51 and 8528.59, both of which provide as follows:
To view table click here.
Consequently, the EC and its Member States nowadays classify certain LCD monitors under subheading 8528.59.10 or subheading 8528.59.90 which results into the application of a 14 per cent duty on such products. In that regard, please see also our previous Trade&Customs newsletter of 20 February 2009 in which we have discussed the judgment of the European Court of Justice in the “Kamino” case concerning CN classification of LCD monitors.
Therefore, the US disputes that such measures are inconsistent with the obligations of the EC and its Member States under Article II:1 (a) and (b) of the GATT 1994 and their Schedules, and consistently nullify or impair benefits accruing to the US under the GATT 1994.
In addition, with respect to set-top boxes, the US notes that the Tariff and Statistical Nomenclature Section of the Customs Code Committee delivered favourable opinions with respect to the proposed amendments to the Explanatory Notes contained in 2008/C 112/03 in October 2006 and May 2007, respectively. However, it did not publish the amended explanatory notes in the EC Official Journal until 7 May 2008. Thus, Member States were applying duties to set-top boxes using the approach specified in 2008/C 112/03 prior to 7 May 2008. The US considers that these actions appear to be inconsistent with the EC's obligations under GATT 1994 Articles X:1 and X:2.
It can be concluded that the core issue for the WTO panel will be to determine whether the disputed new-generation high technology products fall within the scope of products encompassed by the ITA resulting into a duty-free treatment, or can be seen as new products which were not included at the time of the signing of the ITA justifying the application of EU’s tariff policy. The outcome of the WTO panel is of significant importance for the information technology companies as it could affect billions of dollars of global trade.