USTR - WTO Panel Finds Against EC Customs Law Administration
Office of the United States Trade Representative

 

WTO Panel Finds Against EC Customs Law Administration
06/16/2006

GENEVA – Deputy U.S. Trade Representative Peter F Allgeier today announced that a WTO dispute settlement panel today issued a report shining a spotlight on the lack of uniform administration of customs laws in the European Communities (EC). The report comes in a dispute brought by the United States in March 2005.

The United States claimed that the administration of EC customs law by 25 different agencies (one for each of the member States), coupled with a lack of any procedures or mechanisms to reconcile the divergences that inevitably occur on important matters including classification and valuation, is a violation of the EC’s obligation to administer its customs laws in a uniform manner. The WTO panel found that the EC had breached its WTO obligations, finding the EC system of customs administration to be "complicated and, at times, opaque and confusing."

"Today’s panel report calls attention to a serious trade facilitation problem in the EC," Ambassador Allgeier said. "The obligation to administer customs laws in a uniform manner goes back almost 60 years, to the original General Agreement on Tariffs and Trade. A system of customs administration that varies from region to region across the territory of a WTO Member makes the world trading system less efficient and is especially vexing to small traders, as the panel itself noted. If each of the 50 U.S. States administered U.S. customs law through a separate agency, with no central authority to ensure uniformity, there would be no end to the complaints by other WTO Members. The EC, as a WTO Member in its own right, must be held to no less a standard."

Background

In this dispute, the United States challenged (a) the lack of uniform administration of EC customs law, and (b) the lack of an EC tribunal or other procedure for the prompt review and correction of customs administrative actions whose decisions apply throughout the EC. The United States argued that these features of the EC’s customs law administration and review system are inconsistent with GATT Articles X:3(a) and X:3(b), respectively.

The EC’s lack of uniform administration means a good may be classified one way when imported into Germany and an entirely different way, attracting a different rate of duty, when imported into Spain, for example. In fact, even if the customs authority in Germany issues an advance ruling to a given importer stating how it will classify the good, that ruling is not binding in Spain except with respect to the very same importer; the ruling does not bind the customs authority in Spain with respect to identical goods entered by other importers.

A prominent example of the problem, discussed during the dispute, involves flat-panel liquid crystal display monitors with digital video interface ("LCD monitors"). Some agencies classify LCD monitors as computer-related equipment (drawing a zero duty rate), while others classify the goods as "other" monitors (drawing a 14 percent duty rate). For well over a year, the EC Commission has been unable to reconcile the divergent approaches of different agencies. The panel agreed with the United States that the EC fails to administer its customs law in a uniform manner when it comes to classification of LCD monitors.

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