WASHINGTON--A World Trade Organization dispute settlement panel has faulted the United States for changing customs bonding requirements on certain European goods before receiving WTO authorization to retaliate against the European Union's WTO-illegal banana import regime, the Office of the U.S. Trade Representative announced July 17.
However, the panel rejected EU arguments that U.S. tariffs imposed in that case run counter to WTO rules.
The United States does not have to take any action to respond to the WTO panel ruling, which had been released to the parties in April. WTO panel decisions are confidential until formally released.
"While the WTO panel concluded that we acted prematurely when we changed our Customs bonding requirements on EU goods last year, it rejected the EU claim that the tariffs now in place as a result of the banana dispute are not consistent with WTO procedural requirements," U.S. Trade Representative Charlene Barshefsky said in a press release. She added that the EU would be "better served" by complying with the banana panel decision instead of bringing further litigation.
The dispute involves U.S. efforts to retaliate against the EU for failing to bring its banana import regime into compliance with WTO rules by a Jan. 1, 1999 deadline. After haggling over whether the United States could request authority to retaliate immediately or had to wait for a WTO ruling on whether subsequent changes to the banana regime were still WTO-illegal, the two sides agreed to have arbitrators decide if the United States could retaliate and in what amount.
The arbitration decision was due March 2, 1999, but WTO arbitrators informed the parties that they needed additional time. On March 3, 1999, the United States announced that it would ask importers to post bonds on EU products worth some $520 million a year to cover 100 percent duties the United States had asked the arbitrators to approve.
Under Customs rules, importers post bonds to ensure that they will pay any applicable duties. The March 3 action was aimed at assuring that the United States could collect higher duties following WTO authorization. WTO proceedings on this issue were not completed until April 19, 1999, and only authorized retaliation on $191.4 million worth of annual EU imports.
In its complaint, the EU argued that U.S. failure to follow WTO procedural rules made the banana tariffs WTO-inconsistent. However, the panel rejected claims that the United States violated WTO rules by not asking two separate panels to rule on whether and, by how much, the banana import regime harmed U.S. exports. "The EU has presented this argument to several WTO panels; not one has accepted it," USTR said.
By Rossella Brevetti
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