EU to introduce customs duty hikes of up to 100 percent on certain US imports

Developments

The European Commission, the EU’s executive agency, has finalised its list of American-made goods that will be subject to customs tariff increases of up to 100% on importation into any of the 15 EU member countries, including the UK. The increased duties are the EU’s response to the announcement made in March by the US government that safeguard measures will be imposed on imports of steel from most of its trading partners, including the EU.

The products targeted for the increased duty rates extend far beyond US steel imports (which are already now subject to the EU’s own safeguard regime) and questions have been raised as to whether the EU has deliberately targeted certain products for political, rather than economic, reasons. This explains why US goods ranging from clothing and fabrics, though to citrus fruits have been embroiled in the dispute.

The first set of sanctions will take effect from 18th June, 2002, and additional countermeasures have been deferred until such time as the World Trade Organisation (WTO) decides that the US measures are illegal. The European Commission, at least, believes that this result is a foregone conclusion.

US Products Covered by the Interim Sanctions
With effect from 18th June, 2002, additional customs duties of 100% on imports of certain US products are to be imposed if the Commission’s list is accepted by the EU Council which, as things stand at present, seems inevitable. The products covered by the interim increased tariffs will be:

• Stainless steel products
• Spectacles
• Furniture
• Writing implements
• Citrus fruit products and other fresh fruit
• Rice products
• T-shirts
• Men’s and women’s suits, trousers, shirts and similar products
• Most linen products

US Products Covered by the Definitive Sanctions
While the immediate effect of the sanctions is limited to the above-mentioned categories of goods, additional tariff increases ranging from 8% to 100% will automatically come into effect by March, 2005, or sooner if the WTO rules in the EU’s favour in the US-EU Steel Safeguards Dispute. Over 200 US products will be subject to additional EU tariffs if this happens. Sectors affected will include:

• Paper and carton products
• Men’s and women’s clothing
• Footwear
• Steel products
• Iron and steel structures
• Iron and steel construction components
• Printing machinery
• Power tools
• Electric circuit apparatus
• Special purpose motor vehicles
• Optical photocopying apparatus
• Watches
• Armaments
• Furniture and seats
• Certain types of office equipment

Implications for US-EU Trade
It should be borne in mind that the present sanctions being imposed by the EU are only the countermeasures being taken in relation to the US-EU Steel Dispute. The value of the interim measures being taken is estimated to be €377 million but the Commission has appraised the whole package of definitive measures at a value of € 626 million.

Unfortunately for those involved in business with the United States, the situation is set to become far worse as a result of a dispute between the two trade partners in an unrelated matter. The EU is currently awaiting WTO-approval of countermeasures in the US-EU Foreign Sales Corporation Dispute in which the EU has requested approval of countermeasures (i.e. additional tariffs against US products) to the value of €4 billion.

If this happens, taken together, EU countermeasures in the form of increased customs duties could conceivably impact on a very extensive range of US imported products. Given that the duties being imposed range form 8% to 100%, US imports for certain products may, in the very near future, be almost prohibitive.

Economic Operators Affected
The proposed sanctions will hurt economic operators on both sides of the Atlantic.

In the United States, obviously manufacturers of products identified on the interim list will suffer most as European customers cancel orders and decline to place new ones. Manufacturers of items on the definitive list will not be immediately affected until the WTO makes its final ruling on the legality of the US steel safeguard measures or, alternatively, until March 2005, whichever is soonest. The prospect of thee measures hanging over future trade is, however, not exactly conducive to building long term commercial relations.

From the European side, importers, distributors and agents involved in these products will be most affected. European retailers and users of US products targeted for the increases will find future imports extremely expensive indeed because of the additional duties. In such circumstances, alternative suppliers of substitutable products from other countries will probably have to be found. This will not be easy, bearing in mind that many US products, in particular clothing and fabrics, carry brands that enhance their retail value.

For further information, contact David Marks on 020 7367 2136 or be email at [email protected]