Oct 29, 1986

U.S. ASSAILED ON OIL IMPORT TAX AND USER FEES.

GENEVA OCT. 27 (IFDA/CHAKRAVARTHI RAGHAVAN) -- The U.S. legislation imposing a discriminatory tax on imported oil and a general user fee on all imports was assailed Monday at a meeting of the GATT Council by both third world and industrial countries.

Most of the speakers, according to participants, viewed the U.S. action as not only being contrary to the general agreement, but also a violation of the U.S. commitment for standstill undertaken at Punta del Este, and boding ill for the new round itself.

Both the taxes have been levied by the U.S. Congress, just before adjournment, and assented to by President Reagan.

The tax on imported oil is through the "superfund management and authorization act of 1986", aimed at creating a fund to finance a cleaning up programme of Hazardous toxic wastes.

Under the law, imported oil and oil products are to pay a tax of 11.7 cents a barrel, while U.S. domestic oil is to pay a tax of 8.2 cents a barrel.

The so-called user fee, under the "omnibus budget reconciliation act", imposes a customs user fee of 0.22 percent ad valorem on all imports into the U.S.

Canada which raised both the issues, noted that the oil import tax violated the provisions of article III of GATT calling for equal treatment, in such cases, for imports and domestic goods.

The Canadian complaint, and request for consultations under article XXIII, was supported by a large number of countries, both oil-exporters and others.

Those speaking in criticism of the U.S. included Mexico, Nigeria, Norway (for the Nordics), Argentina, Brazil, the EEC, Trinidad and Tobago, Nicaragua, India, Colombia, Cuba and Malaysia, and Venezuela and Ecuador (observers).

The U.S. delegate, who was hard put to justify the tax, merely appears to have contended that the differential (between imports and domestic products) was only 3.5 US cents a barrel or 0.2 percent of the current price of oil, and this could not be seen as a protective device.

On the customs user fee -where article VIII of GATT requires that the fee should be limited to the amount of the approximate cost of the services rendered - the Canadian delegate complained that in effect the U.S. had levied a surcharge on imports.

This was a retrograde step at a time when efforts were on for liberalisation of world trade.

The U.S. claimed that the fee was the approximate cost of the U.S. customs service in processing the imports.

This was however contested by several other countries.

The European Community reportedly pointed out that the fee would raise 800 million dollars, and this was not a small amount, and could not be said to cover the cost of the customs services in processing a particular import.

Australia is reported to have questioned and ad valorem levy, and noted that while on some low-value items, the import fee would amount to eleven dollars, it would be nearly 431 dollars on the import of a Rolls-Royce.

What would be the additional service rendered by the U.S. customs between processing the import of a low-value item and that of a Rolls-Royce to warrant the difference in the user fee, the Australian Delegate is reported to have asked?

Both the issues are expected to come up before the next meeting of the GATT Council, to be held in the first week of November.