U.S. Proposes New Punitive Tariffs On Many Imported Goods
On Friday, September 10, 2004, the Office of the U.S. Trade Representative ("USTR") published notice of possible tariff increases on certain imports. Under international trading rules, the United States is entitled to "compensation" because the European Union ("EU") raised tariffs above their so-called "bound" (i.e., negotiated) levels. The EU tariffs increased as a result of EU enlargement (the new countries adopted the EU common external tariff, which was higher than their bound rates on some products) and a change in its rice import regime. (In reforming the Common Agricultural Program ("CAP"), the EU imposed a specific duty on imports of brown rice and milled rice.) Each of these changes provides the United States the right to compensation.
USTR, therefore, proposes to raise tariffs on selected items, primarily food and agricultural products sourced primarily from the EU. As a result, food vendors, food processors and restaurants should be most concerned about the possibility of higher prices for imported products. In addition, nurseries will be hurt by the increased tariff on flower bulbs, and home furnishing stores will suffer from the increased tariffs on glass decorative products. This is not a comprehensive list of the targeted imports; if your company imports a significant number of products that are primarily sourced from the EU (whether or not your imports are from the EU) please contact us and we will determine if those imports are targeted for tariff increases.
USTR has proposed a list of 141 products against which it may increase tariffs. The list includes certain pork products, various dairy products, a wide variety of cheeses (including gouda, emmentaler, roquefort, stilton, reggiano, and provolone), selected flower bulbs, a variety of olives, various chocolate products and products containing cocoa, certain wines (including Champagne and other sparkling wines), a few tobacco products and some glassware items (but not drinking glasses). The maximum proposed ad valorem tariff rate 97.5%, for certain types of glass tubes, but most of the products could face a tariff of 55% or 60% — an increase of over 600 percent for some products. The highest jump could be on lily bulbs, an increase of over 1600 percent, from 55.70 cents/1000 to 900 cents/1000. Notably, because the US action comes in response to another WTO party’s raising its tariffs (not following a dispute settlement decision), the tariff increases imposed by the United States will be applied on imports from all countries with "most favored nation" status (i.e., nearly all US trading partners), not just those from the EU. Imports from Canada and Mexico, however, will be exempt under NAFTA. Thus, although the EU may be the primary source for, say, wine or industrial diamonds, all imports of those products will be subject to 40 and 50 percent tariffs, respectively.
The proposed list published by USTR is only a starting point. Products can be removed, or the proposed increased duty rate reduced. If there are reasons to exclude products from the list, USTR wants to hear about it. To the end, USTR is holding a hearing and accepting written comments on the proposed retaliation list. The hearing is scheduled for September 24, 2004, and written comments are due by September 28, 2004. The United States must decide by November 1, 2004 whether to seek compensation by raising its tariffs.
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