The European Union has announced that it will comply with a landmark World Trade Organisation (WTO) ruling which condemned EU customs tariffs on high-tech products imported into its 27 member states. Further to the European Union's decision not to appeal the ruling, the WTO Dispute Settlement Body adopted the final report issued by a WTO panel on September 21 2010.
In August 2008 the United States, Japan and Taiwan requested that the WTO establish a dispute settlement panel to adjudicate their dispute with the European Union over its tariff policy for several categories of new-generation high-technology products. The three complainants challenged the European Union's imposition of customs duties of up to 14% on imports of three categories of IT product:
- certain flat panel displays;
- set-top boxes incorporating certain types of modem or a device performing a recording or reproduction function; and
- certain multifunctional machines.
By virtue of the WTO Information Technology Agreement, which was concluded and signed in 1996 by 70 WTO members representing approximately 97% of world trade in IT products, the signatory countries exempted some 180 IT products from customs duties and other charges. The three complainants claimed that the European Union was obliged to grant such exemption to the three product types outlined above.
On August 16 2010 the WTO panel circulated a well-reasoned report in which it considered that the European Union was not entitled to impose import duties on the products concerned, and that the European Union was committed to the duty-free treatment of the products. The dutiable treatment of the products through a number of customs classification instruments resulted in tariff treatment that was less favorable than that provided for in the WTO Schedules of Concessions, and therefore the panel considered that the European Union had violated the General Agreement on Tariffs and Trade 1994 (GATT) by treating the goods as dutiable.
The panel further considered that the European Union had violated its obligations by not publishing promptly certain amendments to the explanatory notes of the EU Combined Nomenclature, which would have allowed governments and traders to become acquainted with them.
The panel also ruled that the European Union had violated GATT by enforcing certain amendments to these explanatory notes before their official publication.
The panel's report was adopted by the WTO Dispute Settlement Body on September 21 2010 following the European Union's decision not to appeal. Consequently, the European Union must now bring its customs laws into line with its WTO obligations and allow the relevant products to enter its 27 member states at a zero duty rate.
The outcome of this dispute will have practical consequences for the day-to-day business of companies which trade in the products concerned with the European Union. Importers will welcome the news that the European Union must now liberalise its market in these high-tech goods in relation to all imports, not merely those from the complainant countries.
The outcome of the panel's report and its adoption by the WTO Dispute Settlement Body will also encourage innovation, since the panel has confirmed that the addition of new features or technologies to IT agreement products will still allow them to benefit from duty-free treatment - this point had initially been refuted by the European Union. The value of IT agreement products imported into the European Union is estimated to Trade & Customs - European Union amount to $11 billion annually - a figure which looks set to increase as a direct result of
this ruling.
