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TWN Info Service on WTO and Trade Issues (Jun18/07)
14 June 2018
Third World Network

       
EU initiates WTO dispute against US tariffs on steel, aluminium
Published in SUNS #8694 dated 5 June 2018


Geneva, 4 Jun (Kanaga Raja) - The European Union has initiated a dispute a t the World Trade Organisation (WTO) over the additional duties imposed by the United States under Section 232 of its trade law on imports of steel and aluminium products.

In initiating the dispute, the EU has sought consultations with the United States, according to a document posted on the EU Commission's website.

Separately, the EU has also initiated a dispute over certain measures imposed by China on the transfer of technology, and requested consultations with China over this issue (see below).

[According to trade officials, the WTO secretariat, having received both these requests for consultations on 1 June, is currently processing them as WTO documents in the three official languages and will make them public once they have been circulated to all WTO members. In the interim, however, the EU has already made its submissions public by posting them on the EU Commission's website at: http://ec.europa.eu/trade/policy/accessing-markets/dispute-settlement/ ]

The request for consultations by the EU is the first step in the dispute settlement process at the WTO.

If the consultations fail to settle a dispute within 60 days after the date of receipt of the request for consultations, the complaining party may request the establishment of a panel.

The establishment of a panel may also be requested by a complaining party during the 60-day period if the consulting parties jointly consider that the consultations have failed to settle the dispute.

EU DISPUTE OVER US STEEL, ALUMINIUM TARIFFS

The EU said its request for consultations with the United States concerns the import adjustments that the United States recently introduced on certain steel and aluminium products in the form of additional import duties.

These measures adversely affect exports of these goods from the European Union to the United States.

With respect to certain steel products, the measures at issue are the import adjustments on certain steel products in the form of additional import duties.

They consist of and are evidenced by the following documents considered alone and in any combination:

-- Presidential Proclamation 9705 of 8 March 2018, Adjusting Imports of Steel into the United States, including the Annex, To Modify Chapter 99 of the Harmonized Tariff Schedule of the United States;

-- Presidential Proclamation 9711 of 22 March 2018, Adjusting Imports of St eel into the United States, amending Proclamation 9705 of 8 March 2018;

-- Presidential Proclamation 9740 of 30 April 2018, Adjusting Imports of Steel into the United States, amending Proclamation 9705 of 8 March 2018, as amended by Proclamation 9711 of 22 March 2018;

-- Presidential Proclamation of 31 May 2018, Adjusting Imports of Steel into the United States, amending Proclamation 9705 of 8 March 2018, as amended by Proclamation 9711 of 22 March 2018 and Proclamation 9740 of 30 April 2018;

-- The Effect of Imports of Steel On the National Security, An Investigation Conducted Under Section 232 of the Trade Expansion Act of 1962, as Amended (19 U.S.C. 1862), US Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation, 11 January 2018.

According to the EU, on 23 March 2018, the United States through these measures introduced additional import duties of 25 per cent ad valorem on steel articles imported from countries other than Canada, Mexico, Australia, Argentina, Korea, Brazil and the European Union and defined at the US Harmonized Tariff Schedule (HTS) 6-digit level as: 7206.10 through 7216.50, 7216.99 through 7301.10, 7302.10, 7302.40 through 7302.90, and 7304.10 through 7306.90, including any subsequent revisions to these HTS classifications.

On 1 June 2018, the United States through these measures introduced additional import duties of 25 per cent ad valorem also on these steel articles imported from Canada, Mexico and the European Union (Australia, Argentina, Brazil and Korea remaining exempt).

For Korea, the United States on 1 May 2018 introduced quotas limiting the quantities of imported steel articles by weight per calendar year starting from 2018.

On 1 June 2018, the United States introduced quotas limiting the quantities of imported steel articles by weight per calendar year starting from 2018 also for Argentina and Brazil.

With respect to certain aluminium products, the measures at issue are the import adjustments on certain aluminium products in the form of additional import duties.

They consist of and are evidenced by the following documents considered alone and in any combination:

-- Presidential Proclamation 9704 of 8 March 2018, Adjusting Imports of Aluminum into the United States, including the Annex, To Modify Chapter 99 of the Harmonized Tariff Schedule of the United States;

-- Presidential Proclamation 9710 of 22 March 2018, Adjusting Imports of Aluminum into the United States, amending Proclamation 9704 of 8 March 2018;

-- Presidential Proclamation 9739 of 30 April 2018, Adjusting Imports of Aluminum into the United States, amending Proclamation 9704 of 8 March 2018, as amended by Proclamation 9710 of 22 March 2018;

-- Presidential Proclamation of 31 May 2018, Adjusting Imports of Aluminum into the United States, amending Proclamation 9704 of 8 March 2018, as amended by Proclamation 9710 of 22 March 2018 and Proclamation 9739 of 30 April 2018;

-- The Effect of Imports of Aluminum On the National Security, An Investigation Conducted Under Section 232 of the Trade Expansion Act of 1962, as Amended, US Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation, 18 January 2018.

According to the EU, on 23 March 2018, the United States through these measures introduced additional import duties of 10 per cent ad valorem on aluminium articles imported from countries other than Canada, Mexico, Austr alia, Argentina, Korea, Brazil and the European Union and defined in the US Harmonized Tariff Schedule (HTS) as: (a) unwrought aluminium (HTS 7601); (b ) aluminium bars, rods, and profiles (HTS 7604); (c) aluminium wire (HTS 7605 ); (d) aluminium plate, sheet, strip, and foil (flat rolled products) (HTS 760 6 and 7607); (e) aluminium tubes and pipes and tube and pipe fitting (HTS 7608 an d 7609); and (f) aluminium castings and forgings (HTS 7616.99.51.60 and 7616.99.51.70), including any subsequent revisions to these HTS.

On 1 May 2018, the United States through these measures introduced addition al import duties of 10 per cent ad valorem also on these aluminium articles imported from Korea (Argentina, Australia, Brazil, Canada, Mexico and the European Union remaining exempt).

On 1 June 2018, the United States through these measures introduced additional import duties of 10 per cent ad valorem also on these aluminium articles imported from Brazil, Canada, Mexico and the European Union (Australia and Argentina remaining exempt).

For Argentina, the United States on 1 June 2018 introduced quotas limiting the quantities of imported aluminium articles by weight per calendar year starting from 2018.

According to the EU document, these measures appear to be inconsistent with the United States' obligations under the covered agreements and, in particular:

-- Article I:1 of the GATT 1994, because, with respect to customs duties an d charges of any kind imposed on or in connection with importation, and with respect to all rules and formalities in connection with importation, the United States fails to accord any advantage, favour, privilege or immunity granted by the United States to certain other countries immediately and unconditionally to the like product originating in the territories of all other Members;

-- Article II:1(a) and (b) of the GATT 1994, because the measures do not ac cord to the commerce of most other Members, including the European Union, treatment no less favourable than that provided for in the appropriate part of the United States' Schedule. They do not exempt the products at issue imported from most other Members, including the European Union, from ordinary customs duties and all other duties or charges of any kind imposed on or in connect ion with importation in excess of those provided for in the United States' Schedule and the GATT 1994;

-- Article X:3(a) of the GATT 1994, because the United States has failed to administer its laws, regulations, decisions and rulings in relation to the measures at issue in a uniform, impartial and reasonable manner;

-- Article XI:1 of the GATT 1994, because the United States has instituted restrictions other than duties, taxes or other charges, made effective thro ugh quotas, on the importation of products of the territory of other Members;

-- Article XIX:1(a) of the GATT 1994, because the United States has suspended tariff concessions without the products at issue being imported into the territory of the United States in such increased quantities and under such conditions as to cause or to threaten serious injury to domestic producers in the United States of like or directly competitive products, as a result of unforeseen developments and of the effect of the obligations incurred under the GATT 1994;

-- Article XIX:2 of the GATT 1994, because the United States has failed to give notice in writing to the WTO as far in advance as may be practicable and has failed to afford the WTO and WTO Members having a substantial interest as exporters of the products concerned an opportunity to consult with it in respect of the proposed action;

-- Article 2.1 of the Agreement on Safeguards, because the United States applies safeguard measures to the products in question without first having determined, pursuant to the subsequent provisions of the Agreement on Safeguards, that such products are being imported into its territory in such increased quantities , absolute or relative to domestic production, and under such conditions as to cause or threaten to cause serious injury to the domestic industry that produces like or directly competitive products;

-- Article 2.2 of the Agreement on Safeguards, because the United States does not apply the safeguard measures to imported products irrespective of their source;

-- Article 3.1 of the Agreement on Safeguards, because the United States applies safeguard measures to the products in question without first properly conducting an investigation and publishing a report that sets forth findings and reasoned conclusions on all pertinent issues of fact and law;

-- Article 4.1 of the Agreement on Safeguards, because the United States has not properly determined that there is serious injury, or threat thereof, to a domestic industry;

-- Article 4.2 of the Agreement on Safeguards, because the United States has failed to properly evaluate all relevant factors having a bearing on the situation of the domestic industry; has failed to demonstrate the existence of a causal link between increased imports and serious injury or the threat thereof, including by not attributing injury caused by factors other than increased imports; and has failed to publish a detailed analysis and demonstration of its conclusions;

-- Article 5.1 of the Agreement on Safeguards, because the United States is applying safeguard measures beyond the extent necessary to prevent or remedy serious injury and to facilitate adjustment;

-- Article 7 of the Agreement on Safeguards, because the United States is applying safeguard measures without making provision for their application only for the period necessary to prevent or remedy serious injury and to facilitate adjustment, without limitation to four years, and without making provision for progressive liberalisation at regular intervals;

-- Article 9 of the Agreement on Safeguards, because the United States is applying safeguard measures against products originating in developing country Members whose share of imports of the products concerned in the United States does not exceed 3 per cent, without developing country Members with less than 3 per cent import share collectively accounting for more than 9 per cent of total imports of the products concerned;

-- Article 11.1(a) of the Agreement on Safeguards, because the United States has taken emergency action on imports of particular products as set forth in Article XIX of the GATT 1994, without such action conforming with the provisions of that Article applied in accordance with the Agreement on Safeguards;

-- Articles 12.1, 12.2 and 12.3 of the Agreement on Safeguards, because the United States has failed to comply with any of the notification and consultation obligations set out in these provisions; and

-- Articles I:1, II:1(a) and (b), X:3(a) and XI:1 of the GATT 1994, as a consequence of each of the above inconsistencies with the provisions of Article XIX of the GATT 1994 and the Agreement on Safeguards.

In addition, the European Union considers that Section 232 of the Trade Expansion Act of 1962, as amended (19 U.S.C. =A71862), as repeatedly interpreted by the United States' administrative and judicial authorities in the above and other measures, is "as such" inconsistent with the United States' obligations and rights set out in the WTO Agreement.

According to the EU, Section 232, so interpreted, provides for the United States' Secretary of Commerce and President to determine, ostensibly because of an alleged threat to the national security of the United States, that addition al import duties or similar measures be imposed because imports of certain products (such as steel or aluminium), in particular quantities and/or at particular price s, cause or threaten injury to domestic commercial production facilities, which are therefore to be protected against competition from imports in order to ensure that they are economically viable.

As such, Section 232, so interpreted, is inconsistent with the balance of obligations and rights set out in the WTO Agreement, particularly those set out above, and fails to ensure the conformity of United States laws, regulation s and administrative procedures with the United States' obligations under the WTO Agreement, in a manner that is also inconsistent with Article XVI:4 of the WTO Agreement.

These measures appear to nullify or impair the benefits accruing to the European Union directly or indirectly under the covered agreements, said the EU document.

EU-CHINA DISPUTE OVER TECHNOLOGY TRANSFER

The EU said its request for consultations with China is with respect to certain Chinese measures pertaining to the transfer of foreign technology into China. These measures adversely affect the protection of the intellectual property rights of foreign companies transferring technology to China.

According to the EU, through its domestic legislation, China imposes a different set of rules on the import of technology, including industrial property rights, other intellectual property rights and undisclosed information ("intellectual property rights"), than the rules which are applicable to technology transfers occur ring between Chinese companies.

The Chinese measures at issue appear to: (i) discriminate against foreign holders of intellectual property rights, and (ii) restrict the foreign right holder s' ability to protect certain intellectual property rights in China, contrary to China's WTO obligations.

China imposes restrictions on the rights of foreign intellectual property right holders to freely negotiate market- based contractual terms in licensing an d other technology-related contracts concerning the transfer of technology to China.

Notably, China imposes mandatory contract terms for contracts concerning the import of technology into China that discriminate against and are less favourable for foreign intellectual property rights holders.

In addition to being discriminatory, these mandatory contract terms also appear to restrict intellectual property right holders who import technology into China in their ability of protecting their intellectual property rights in China.

Furthermore, in the context of joint ventures established with Chinese partners, China imposes mandatory contract terms that discriminate against and are less favourable for foreign intellectual property right holders, as well as restricting their ability to protect their intellectual property rights in China.

According to the EU, the Regulations of the People's Republic of China on the Administration of the Import and Export of Technologies ("TIER"), operating separately or together with other listed instruments, appear to be inconsistent with Article 3 (National Treatment) of the TRIPS Agreement, solely or in conjunction with Article 28.1(a) and (b), Article 28.2 and Article 39.1 and 39.2 of the TRIPS Agreement respectively, because China imposes restrictions on the rights of foreign intellectual property right holders, notably, on their right to freely negotiate and agree on market-based contractual terms in licensing and other technology-related contracts concerning the import of technology to China.

For example, it said:

* Foreign transferors of technology are subject to certain administrative burdens pursuant to Articles 18 through 21 TIER. Notably, all technology import contracts must be notified to and registered by the Chinese authorities and copies of the contracts must be provided. These formalities apply also if the contract is subsequently amended or terminated.

* Article 24 TIER requires that licensors of imported technology indemnify licensees for all liabilities for infringement resulting from the use of the transferred technology.

* Article 27 TIER requires that any improvements to imported technology belong to the party making the improvement.

* Article 29 TIER appears to restrict the terms of import technology contracts by prohibiting a number of clauses in import technology transfer contracts. In particular, Article 29(3) TIER provides that a technology import contract cannot contain clauses restricting the transferee from improving the technology supplied by the supplying party, or restricting the receiving party from using the improved technology.

According to the EU, domestic intellectual property right holders are not subject to such restrictions in the context of domestic technology transactions.

As a result, through the measures at issue China appears to accord less favourable treatment to foreign intellectual property right holders compared to Chines e intellectual property right holders, contrary to Article 3 of the TRIPS Agreement.

In addition, it appears to limit the exclusive rights of non-Chinese patent holders, contrary to Article 28.1(a) and (b) of the TRIPS Agreement.

It also appears to limit the rights of non-Chinese patent holders to assign or transfer by succession patents and to conclude licensing contracts, contrary to Article 28.2 of the TRIPS Agreement.

Finally, as a result of these restrictions China also appears not to ensure effective protection for foreign intellectual property rights holders of undisclosed information contrary to its obligations under Article 39.1 and 39.2 of the TRIPS Agreement.

The EU also said that the Regulations for the Implementation of the Law of the People's Republic of China on Chinese-Foreign Equity Joint Ventures ("JV Regulation"), operating separately or together with other listed instrument s, appear to be inconsistent with Article 3 (National Treatment) of the TRIPS Agreement, Article 28.1(a) and (b), Article 28.2, Article 33 and Article 39 .1 and 39.2 of the TRIPS Agreement (each Article either solely or in conjunction w ith the others), because China imposes restrictions on the rights of foreign intellectual property right holders, notably, on their right to freely negotiate and agree on market-based contractual terms in licensing and other technology-related contracts concerning the import of technology to China.

For example, it said:

* The first paragraph of Article 43 of the JV Regulation provides a general examination and approval requirement for any technology transfers agreement s entered into by a joint venture.

* Point (3) of the second paragraph to Article 43 of the JV Regulation provides that the duration of a technology transfer agreement is generally no longer than 10 years.

* Point (4) of the second paragraph to Article 43 of the JV Regulation provides that the technology importing party retains the right to use the transferred technology continuously, after the expiration of the technology transfer agreement.

According to the EU document, China thus appears to afford less favourable treatment to foreign intellectual property rights holders as compared to Chinese intellectual property rights holders, contrary to Article 3 of the TRIPS Agreement.

With respect to foreign patent holders, China appears to violate Article 33 of the TRIPS Agreement, according to which the term of patent protection should be at least 20 years, and to limit the exclusive rights of foreign patent holders, contrary to Article 28.1(a) and (b) of the TRIPS Agreement.

Furthermore, China appears to limit the rights of foreign patent holders to assign or transfer by succession patents and to conclude licensing contracts, contrary to Article 28.2 of the TRIPS Agreement.

Furthermore, as a result of these restrictions China also appears not to ensure effective protection for foreign intellectual property rights holders of undisclosed information contrary to its obligations under Article 39.1 and 39.2 of the TRIPS Agreement.

Finally, said the EU, China appears to apply and administer its laws, regulations and other measures governing the transfer of technology into China with a view of inducing the transfer of foreign technology to China, which is contrary to China's obligations under Article X.3(a) of the GATT 1994 and Paragraph 2(A)2 of the Protocol on the Accession of the People's Republic of China to the WTO, because it does not constitute impartial and reasonable application and administration of its laws, regulations and other measures.

China's measures appear to adversely affect exports to China of technology, including intellectual property rights, by European Union undertakings and also appear to nullify or impair the benefits accruing to the European Union and its Member States directly or indirectly under the cited agreements, said the EU.

 


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