1

US Complaint Over the EU Customs

System.

PENDING WTO CASE

Dzifa Acolatse ● Jean-Guy Afrika ● Sarah Ayers ● Aleksandra Ciric

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Background of the Case - Introduction

U.S. request for a dispute settlement panel to hear its complaint concerning the lack of uniformity in the European customs procedures.

Request for panel establishment filed in January 2005 due the failure to resolve the dispute in mid-November 2004 in consultations.

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Background of the Case – Main Argument Brought by the US

Violates WTO Customs Law

Lack of Uniformity in Implementing Customs Rules Throughout the 25 EU Member States

Lack of Procedures for Prompt EU-Wide Review

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Three Reasons for Requesting WTO Consultations

1. The EU has just recently expanded from 15 member states to 25 member states (as of May 1, 2004). The trade barrier inherent in the lack of a uniform customs administration expanded when the new member states joined.

2. Enhancing trade facilitation is a key part of the DOHA Development Agenda.

3. “Over the past months, the U.S. has tried to work with the EU to address the concerns of U.S. exporters… and although the EU trade commissioner and his staff have tried to help with individual problems, it has become clear that the allocation of authorities within the EU and even the commission has precluded achieving the necessary systematic solutions.”

~ Robert Zoellick

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US ComplaintAlleged Lack of Uniformity

Differences in licensing requirements for importation of food products.

Differences in procedures for processing express delivery shipments.

Differences in penalties and differences in procedures regarding the imposition of penalties for violation of customs rules.

Differences in record-keeping requirements.

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US Complaint ContinuedAlleged Lack of Uniformity

Differences in the classification and valuation of goods.

Differences in the provision of binding classification and valuation information to importers.

Differences in procedures for the entry and release of goods; some member states have automated systems, others do not.

Differences in certificate of origin requirements. Differences for physical inspection of goods.

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Statement from the US Trade Representative

“Although the EU is a customs union, there is no single EU customs administration. Lack of conformity, coupled with lack of procedures for prompt EU-wide review can hinder US exports, especially for small to mid-sized businesses.”

~ Robert Zoellick, (former) US Trade Representative,USTR Office

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Export Statistics on US Small and Medium-Sized Enterprises

1997: SMEs accounted for 96.5% of all US exporters, up

from 95.7% in 1992. SMEs’ share of exports hit 30.6% in 1997, up from

29.5% in 1992 and 26.4% in 1987.

2001: Overall, there was a 3% decrease in the number of

exporting companies between 2000-2001.STILL: SMEs accounted for 96.8% of all US exporters. SMEs share of export value was 29.2%.

Source: US Dept. of Commerce-US Census Bureau-Foreign Trade Division

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Exports to the EU15

73010 71930

5161 4899

0

10000

20000

30000

40000

50000

60000

70000

80000

2000 2001

Year

Nu

mb

er

of

Exp

ort

ers

Small andMedium-SizedEnterprises

Large Enterprises

Data Source: US Dept. of Commerce - “A Profile of U.S. Exporting Companies, 2000-2001”, Table 5b & Table 5a

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Critical Issues

GATT 1994 Issues

Regarding Article X:1: Laws, regulations, judicial decisions and administrative rulings of general application pertaining to the classification or the valuation of products for customs purpose shall be published promptly in such a manner as to enable governments and traders to become acquainted with them.

Regarding Article X:3(a): Customs laws must be administered in

a uniform, impartial and reasonable manner.

Regarding Article X:3(b): A forum must be maintained for prompt review and correction of administrative actions relating to customs matters.

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Critical Issues

Customs laws in the EC are administered by Member States authorities.

● Key aspects of customs law administration

are left to the discretion of Member States,

reviewable by national courts.

● Review by an EC forum (the European

Court of Justice) may be available only after

years of domestic litigation.

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Critical Issues

♦ Member States of the EU are required, due to the EC Law of supremacy over national laws, to adopt all laws and regulations and bring them into their national governing system.

♦ However, due to the variation of forms that administration efforts take on in each Member State, the speed and efficiency with which this is performed varies as well.

♦ This is a HUGE concern given the recent enlargement of the EU to include many Central and Eastern European nations whose administrative techniques are underdeveloped.

♦ In addition, some of the newer Member States are allowed an extra amount of time to incorporate EC Law into their national system.

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EU Customs and Tariffs

Customs Code The Community's basic customs legislation is contained in the

Customs Code (Council Regulation (EEC) No 2913/92) and the Code's implementing provisions (Commission Regulation (EEC) No 2454/93).

Tariffs Tariff Schedule (Council Regulation (EEC) no 2658/87 and

annexes thereafter) – gives tariff and statistical nomenclature on the Common Customs Tariff.

TARIC - presents all third-country and preferential duty rates currently applicable, as well as all commercial policy measures.

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Customs and Tariff Administration in the EU

European Commission - Administrative and Executive Body Commission draws up legislation proposals and presents it to the

European Council and European Parliament for approval.

Directorate-General for Taxation and Customs Union Division (DGTAXUD)

Responsible for the management and implementation of customs and tariffs.

Commission is entrusted by EU Treaty to supervise the compliance of EC laws and regulations by Member States.

If the Commission feels that a Member State has failed to comply with EC law, then the Commission can bring the Member State before the European Court of Justice. France: Duty rate on dark and Virginia-type tobacco cigarettes

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European Community Law Hierarchy

EC LAWSupranational

Member State² LawMember State¹ Law Member State³ Law

Transposed into: Transposed into:

National Customs Authority¹ National Customs Authority² National Customs Authority³

Implemented and Enforced by:

Implemented and Enforced by:

International Law(i.e. WTO)

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European CommunitiesGATT/WTO Signatory – January 1, 1995

EU15

Austria PortugalBelgium SpainDenmark SwedenFinland United

KingdomFranceGermanyGreeceIrelandItalyLuxembourgNetherlands

10 New MembersCentral and Eastern European

Countries-CEEC, plus Cyprus & Malta

CyprusCzech RepublicEstoniaHungaryLatviaLithuaniaMaltaPolandSlovak RepublicSlovenia

2007 AccessionBulgaria and Romania

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How It All Works

Decentralization Initially, implementation, complete compliance and

enforcement of law are left up to the Member States

Administrative Traditions How the Member States Deal with Laws -

Interpretations Different Cultures Issues of Corruption - Bribery

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Judicial Concerns

Legal Process Would Take a Lot of Time, Energy and Money In the business world, time is of the essence

and time is money.

US Success in the EU (or Member State) Situation is NOT Guaranteed

Therefore, Could Only be Pursued Out of Altruistic Intentions to Establish a Precedent

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EU Counterpoint

EC dismissed the US claim as “having no legal basis.”

The EU Trade Commissioner Pascal Lamy stated that the EU, “regret(s) the US move to bring this issue to the WTO rather than using the bilateral EU-US Joint Customs Council, which would have provided a better forum for resolving these issues.”

However, the EU believed that it should proceed with participating in the WTO consultations since the EC was of the opinion that the Community was in fact complying with all WTO rules.

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EU-US Customs AgreementInitialed in Washington, DC on November 7, 1996

Agreement between the European Community and the US on Customs Cooperation and Mutual Assistance in Customs Matters.

Article 22: Established a Joint Customs Cooperation Committee. Obligations:

1. See to the proper functioning of the agreement;

2. Examine all issues arising from its application;

3. Take measures necessary for customs cooperation in accordance with the objectives of this agreement;

4. Exchange views on any points of common interest regarding customs cooperation, including future measures and the resources for them;

5. Recommend solutions aimed at attaining the objectives of this agreement.

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The EU Indeed Recognizes that it is not Perfect

In a March 2001 report by the EU Court of Auditors, the European Commission stated:

“The objective that for all trade in goods the Community should operate as a real customs union with uniform treatment of imported goods can be fully obtained only if the customs union is operating on the basis of a single customs administration, which is not the case.”

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Conclusion

Is the manner in which the EU has established its customs union lacking in uniformity to the extent that it is indeed hampering exports from the US into its borders?

►If a dispute panel is established, the US must present evidence that the EU customs system has indeed

harmed US businesses.

Is it more productive and beneficial to handle trade disputes at a multi-lateral level (WTO), or through bilateral means (EU-US Trade Agreement)?

Which possesses more power – WTO or Trade Agreements between countries?

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Sources WTO – WT/DS315/1- “European Communities – Selected Customs Matters,”

http://www.wto.org/english/tratop_e/dispu_e/dispu_status_e.htm BBC News - http://newsvote.bbc.co.uk Bridges Weekly Trade News Digest, Volume 8, Number 33, Oct. 6, 2004. U.S. Mission to the UN in Geneva, Press Release, “U.S. Statements at the WTO Dispute

Settlement Body (DSB),” http://www.us-mission.ch/Press2005/0125DSBMetting.htm. Jan. 25, 2005.

Office of the USTR, “U.S. Requests WTO Panel Against EU Over European Customs System,” http://www.ustr.gov. Jan. 13, 2005.

EUBusiness, “US Files WTO Complaint Over EU Customs System,” http://www.eubusiness.com. Aug. 21, 2004.

US Department of Commerce, “Small & Medium Sized Exporting Companies: A Statistical Profile,” http://www.ita.dot.gov. Dec. 1997.

US Department of Commerce-US Census Bureau-Foreign Trade Division, “A Profile of U.S. Exporting Companies, 2000-2001,” http://www.census.gov/foreign-trade/aip/edbrel-0001.pdf. Feb. 2003.

Tralac, “EU Responds to US Complain that it Doesn’t Act Like a Customs Union,” http://www.tralac.org. Sept. 27, 2004.

European Union in the US, “EU-US Partnership,” http://www.eurunion.org/partner/agreemen.htm

Hogan & Hartson, LLP, “U.S. Challenges Lack of Uniformity in EU Customs Administration,” Customs and International Trade. http://www.hhlaw.com/articles. October 2004.