International Trade and Customs Practice
Companies involved in the manufacture/trade of goods with an environmental benefit need to be aware that the window is closing on a meaningful opportunity to have tariffs reduced or eliminated on a multi-jurisdictional basis. The United States and 13 other willing WTO Members, including the EU, China and Japan, have agreed to negotiate an environmental goods agreement ("EGA") that will reduce or eliminate tariffs on such goods, much like the WTO Information Technology Agreement ("ITA") did for the IT industry, and the WTO Pharmaceutical Agreement did for the pharmaceutical and chemical industries, in the 1990s.1 Those industries have benefited enormously from the elimination of tariffs under those agreements. Given that duties on "environmental goods" can range from 5-35% outside of the United States, U.S. companies that manufacture/trade such goods need to take advantage of this similar opportunity. Companies whose products are covered under the EGA stand to achieve a significant competitive advantage (particularly as compared to companies whose products are not covered).
The Time Is Now
Companies with an interest in having their products designated as "environmental goods" should act now. Once the EGA is concluded, it may be difficult to get new products added, as demonstrated by the recent breakdown in negotiations to expand the coverage of the ITA nearly eighteen years after the agreement’s conclusion. A company does not want to find out all too late that its competitors’ products were covered under the EGA and its products were not.
1 The EGA negotiations are open to all WTO Members that are prepared to eliminate tariffs on a set of environmental goods. The willing WTO Members include: Australia, Canada, China, Costa Rica, the European Union, Hong Kong, Japan, Korea, New Zealand, Norway, Singapore, Switzerland, Chinese Taipei and the United States. Letters from Ambassador Michael B.G. Froman, U.S. Trade Representative, to Hon. John Boehner, Speaker, U.S. House of Representatives, and Hon. Patrick Leahy, President Pro Tempore, U.S. Senate (Mar. 21, 2014) available at http://www.ustr.gov/about-us/press-office/ press-releases/2014/March/USTR-announces-intent-to-launch-WTO-negotiations-on-environmental-goods.
Interested companies should also be aware that there is no universally-accepted definition for what constitutes an "environmental good". As a result, companies involved in the manufacture/trade of goods with an environmental benefit, however slight, should consider pursuing this opportunity. The WTO Members that are participating in the EGA negotiations have announced their intention to build upon and expand a list of 54 environmental goods that the Asia-Pacific Economic Cooperation ("APEC") Leaders have agreed to reduce tariffs on by the end of 2015. The APEC list includes products typically thought of as "environmental goods", such as solar panels, solar water heaters, electric generating sets for wind turbines, etc., but it also includes articles such as gas turbines and laboratory instruments used in environmental technologies (e.g., air quality monitors, furnaces used to destroy hazardous and solid waste, etc.). WTO Members have proposed a diverse range of products for inclusion under the EGA in the past, including mobile drilling derricks, towers and lattice masts for wind turbines, certain chemical polymers and resins and energy-efficient consumer electronic equipment (e.g., air conditioners, refrigerators, PCs, telephones, cameras, lighting, etc.). Companies should also consider whether to propose coverage of raw materials and components used in the manufacture of finished environmental goods. Parts of certain finished environmental goods are already included on the APEC list.
The U.S. Trade Representative ("USTR") is currently accepting comments on the EGA and interested companies should act fast. Specifically, USTR is seeking comment on: (1) products that the United States should seek to include under the EGA; (2) the products’ environmental uses and benefits; (3) U.S. trading partners that are significant producers or consumers of environmental goods; and (4) how to ensure that the EGA remains relevant in the future.2 As the definition of an "environmental good" is fluid, companies should emphasize the specific environmental benefits and uses their proposed products afford in their written submissions. Written comments are due to USTR on May 5, 2014.3
The comments will help establish the United States’ negotiating position at the international level. Companies with an interest in having articles designated (or not designated) as "environmental goods" under the EGA should act soon to make their interests known.
2 Request for Comments on an Environmental Goods Agreement, 79 Fed. Reg. 17,637 (Mar. 28, 2014).
3 If Companies are also interested in testifying at an oral hearing in Washington, DC on June 5, 2014, they should provide written notification of their intent to appear to USTR