On August 16, 2010, the WTO issued the reports of the panel on the tariff treatment of certain information technology products by the EU and its Member States. The reports follow the complaints by the United States, Japan and Chinese Taipei against the EU and its Member States for failing to comply with their scheduled dutyfree tariff concessions arising from the Information Technology Agreement (ITA).  

The complaint was focused on three specific types of products: Flat Panel Displays (FPDs), Set Top Boxes which have a Communication function (STBCs) and Multifunctional Digital Machines (MFMs).  

The complaining parties claim that the EU is required to accord duty-free tariff treatment to the aforementioned products under the European Communities Schedule of Concessions to the GATT 1994 pursuant to modifications therein to reflect the commitments it has made under the ITA. In its lengthy report of over 450 pages, the panel considers all aspects of these cases. For all products, the panel finds that the EU and its Member States have acted “inconsistently” with its obligations under the GATT 1994. The main conclusions are:  

FPD

“The European Communities fails 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, the European Communities is inconsistent with Article II:1(a) of the GATT 1994. This inconsistency is not eliminated by the duty suspension with respect to certain products in dispute falling within the scope of the FPDs narrative description or within the scope of CN code 8471 60 90 because the duty suspension measure does not eliminate the failure to accord treatment no less favourable to the commerce of the other WTO Members.”  

STBCs

“The measures (of CNEN 2008/C 112/03) 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 measures (of CNEN 2008/C 112/03) direct national customs authorities to classify under dutiable headings 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. 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.”  

MFMs

“The regulation(s) (517/1999 and 400/2006) 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 regulation (517/1999) requires dutiable treatment of certain non-ADP MFMs that fall within the scope of the concession for "facsimile machines" in HS1996 subheading 8517 21 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.  

“Because the measure has guided and serves to guide the European Communities uniform application of the common customs tariff in a way that results in the application of duties to those ADP MFMs that fall within the duty-free concession, the measure is inconsistent with Article II:1(b) of the GATT 1994.  

“Because the measure has guided and serves to guide the European Communities uniform application of the common customs tariff in a way that results in the application of duties to those non-ADP MFMs that fall within the duty-free concession, the measure is inconsistent with Article II:1(b) of the GATT 1994.  

“The regulation (400/2006) does not require the dutiable treatment of non-ADP MFMs with a facsimile function. Therefore, the European Communities has not acted inconsistently with Article II:1(b) of the GATT 1994 with respect to non-ADP MFMs with a facsimile function as the measure does not impose duties in excess of those provided for in the EC Schedule.  

“The three relevant CN2007 codes require that certain ADP MFMs which fall within the scope of the duty-free concession for input or output units of an ADP in subheading 8471 60 of the EC Schedule be charged a duty of 6 per cent. Therefore, with respect to these products, the measure is inconsistent with Article II:1(b) of the GATT 1994.  

“The three relevant CN2007 codes require that certain non-ADP MFMs which fall within the scope of the dutyfree concession for "facsimile machines" in subheading 8517 21 of the EC Schedule be charged a duty of 6 per cent. Therefore, with respect to these products, the measure is inconsistent with Article II:1(b) of the GATT 1994.”  

Pursuant to finding that the EU has acted inconsistently with the GATT 1994, the panel recommend “that the Dispute Settlement Body request the European Communities to bring the relevant measures into conformity with its obligations under the GATT 1994.”  

In previous issues of the European VAT, Customs and Trade Alert, we have discussed the developments in the field of the tariff classification of information technology products on multiple occasions. The tariff classification of these products is an ongoing source for discussion and disputes between the industry and the Customs Authorities. Now that the panel has concluded that EU and its Member States have acted in violation of their ITA obligations, it is anticipated that these ongoing discussions on, for example, flat panel displays and multifunctional printers, will soon enter a new phase. Although the report of the panel is not directly binding and will as such not have a direct effect, the conclusions are expected to have a positive influence on the ongoing classification discussions.