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The following story is from the May 14 issue of International
Trade Reporter
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Information Technology
U.S. Accuses EU of Undermining Agreement
On Information Technology in WTO Dispute
GENEVA—The United States has accused the European Union of undermining the World Trade Organization's Information Technology Agreement (ITA) through its restrictive interpretation of the accord, an interpretation that has resulted in the imposition of duties on high-tech goods that should benefit from duty-free treatment.
In arguments made before a WTO dispute panel hearing May 12 to review a joint complaint filed by the United States, Japan, and Taiwan, the United States said the EU's insistence in imposing tariffs on three categories of IT goods—set-top boxes with communication functions; flat panel displays for computers;
and multifunctional digital machines that can fax, scan, and/or copy documents—would, if upheld, have a damaging impact on the 1997 agreement by seriously reducing its scope of coverage.
The panel was established in September 2008 on the request of the three complaints, who argued that, by continuing to impose tariffs, the EU is violating the ITA, which requires participating countries to eliminate import tariffs on some 180 covered products such as semiconductors, computers, and telecommunications equipment.
The complainants contend that set-top boxes are currently subject to a 13.9 percent import tariff in the EU, while flat panel displays are being hit with a tariff of 14 percent. The multifunctional scan/fax/ copy devices are classified as photocopying machines and subject to an import duty of 6 percent.
‘Objectively Different.'
The EU counters the products in question are not covered by the ITA because they are “objectively different”
from the specific goods listed for coverage under the agreement.
The panel hearing will continue through May 14. The panel is expected to issue its ruling sometime in the second half of 2009.
In its statement to the panel, the United States said the EU position arguments “reveals its view that any change to a device results in a ‘new product’ excluded from the ITA. This position is unsupported by the text of the concessions at issue.”
“Furthermore, if this position were accepted, virtually no products on the market today would be covered by the ITA,” the United States continued. “Products have improved over time, incorporated advanced features or improved technologies, yet they still fall within the ordinary meaning of the original concessions.”
The EU's belief that products would fall out of the scope of coverage with every technological improvement and new feature added effectively means that, “from the moment the ink dried on the page, the list of ITA-covered products has been steadily dwindling to nothing,” the United States added.
Arbitrary Characteristics
Washington argued that the EU has imposed duties on the products at issue “through a steady stream of measures singling out arbitrary technical characteristics” to exclude these products from duty-free treatment.
For example, half of the flat panel liquid crystal display (LCD) monitors today are equipped with a digital visual interface
(DVI) plug “and therefore they, in the EU's view, fall outside the coverage” of the ITA agreement, the United States said. In addition, set top boxes “increasingly use newer modem technologies or incorporate a hard disk and are thus, according to the EU, excluded from its duty-free obligations.”
Under the EU measures, “the more industry innovates—even incremental improvements such as faster print speed or a new connector cable—the more duties will be leveled on IT products entering the EU,” the United States declared.
The EU countered in its statement to the panel that the position of the complainants might undermine future efforts to expand ITA coverage by calling into question the existing commitments of parties.
The complainants “are seeking to achieve very short term trade gains at the expense of the indispensable legal certainty and predictability of tariff concessions,” the EU argued. “It is obvious, however, that, without the latter, all members will become reluctant to pursue the ITA liberalization process.”
“Thus, far from furthering the ITA's object and purpose, the complainants’ short-sighted claims may well have the opposite effect,” Brussels added.
Last September the EU proposed launching negotiations on expanding coverage of the ITA to take account of new technologies and convergence, address non-tariff barriers such as classification divergences between parties to the agreement, and increase the number of WTO members signed on to the accord. The United States later described the EU proposal as “premature.”
Multifunctional Products an Issue
The EU admitted difficulties arise with the three product categories at issue because of their multipurpose nature, but said the complaints were arguing that any multifunctional product which happens to have a function covered by the ITA must always be classified according to that function, irrespective of its importance.
“In essence, the complaints’ view is that an ITA concession always trumps a non-ITA concession,”
the EU declared.
The EU cited flat panel displays as an example where the complainants were seeking to classify the good as an ITA-covered product (in this case, a computer monitor) even though it is not used as such.
The complainants “seem to seriously claim that 61 inch flat panel monitors should, apparently generally, be entitled to duty-free treatment as computer monitors,” the EU declared, adding that it “would be happy to attempt to present to the panel a 61 inch plasma monitor in its full glory so that the panel can determine for itself whether such a monitor is designed to be ‘viewed at close proximity,” this being one of the key criteria for distinguishing between computer monitors and video monitors…”
In a statement, the U.S.-based Information Technology Industry Council accused the EU of “hiding behind artificial distinctions” to undermine the ITA.
“It is remarkable that in light of a compelling international challenge, two harsh rebukes from its own highest court, and a professed commitment to innovation, the Commission continues to allow its customs officials to run amok and levy tariffs as high as 14 percent on high-tech goods that European consumers and businesses rely on,” declared John Neuffer, ITIC vice president.
In a Feb. 19 ruling, the European Union's highest court reprimanded the European Commission for insisting on levying duties on imports of LCD monitors, arguing that the monitors should be classified under a tariff subheading covered by the ITA Agreement (26 ITR 293, 2/26/09).
By Daniel Pruzin
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