Feb 6, 1987

GATT PANEL SET UP OVER U.S. SUPERFUND LEVY.

GENEVA FEBRUARY 4 (IFDA/CHAKRAVARTHI RAGHAVAN) -- The GATT Council agreed today to the establishment of a panel over the dispute between Mexico, Canada and the EEC on the one side and the U.S. on the other, over the levy of excise duties on imported petroleum and petroleum products to finance an environment clean-up superfund.

The U.S. levy, which has become effective, taxes imported petroleum at 11.7 U.S. cents a barrel while domestic petroleum is taxed at a lower 8.2 cents.

All the three complaints have pointed out that such a discrimination between an imported and domestic product is a clear violation of article III of GATT.

The EEC and Canada have also complained of a possible tax, under the U.S. law, on petrochemical imports and other petroleum derivatives, which could amount to a five percent duty if the importer does not provide the U.S. with sufficient information.

This tax on petrochemicals and petroleum derivatives has not so far come into force, and is subject to promulgation of regulations by the administration. Nor is the levy automatic, but depends on unspecified circumstances.

A GATT spokesman said that the circumstances under which the tax would be levied on petrochemicals and petroleum derivatives, or the nature of the "sufficient information", had not been explained at the Council by the EEC, Canada or the U.S.

In agreeing to the setting up of a single panel to deal with all the complaints, the U.S. took the position that this was without prejudice to its stand that the levy was negligible or minimal, and that the superfund levy was not intended to adversely affect trade nor was it a protectionist measure, but intended to finance environmental cleanup.

The tax on petrochemicals and petroleum derivatives, the U.S. argued, had not also come into force.

Canada however underscored the discriminatory nature of the levy, as between domestic and imported products.

Besides the three complainants, a number of countries expressed interest in exercising their GATT rights and participating in the panel’s work.

These countries included Nigeria, Kuwait, Norway, Indonesia, Australia, Colombia, Malaysia, Argentina and Chile.

Earlier, the GATT Council established another panel, to be chaired by the Mexican delegate, Amb. Manuel Tello, to adjudicate the dispute over the EEC’s complaints against Japan about the latter’s obstacles to imports of wines and spirits.

The EEC has contended that Japan imposed discriminatory taxation on imported alcoholic drinks, and in the labelling and classification of some of them, particularly whiskies and some other spirits.

As a result the imported products are subject to much higher taxes and duties than like domestic products.

The EEC complaint has been a long-standing one, and raised in the council last year, when Japan had sought to resist the establishment of a panel on the ground that the government policies were due to change.

On Wednesday, the Japanese delegate would appear to have explained these changes, including the reduction of the original three grades of whisky (for tax purposes) into a single new grade, and one of the original categories being now brought under "spirits", rather than whisky.

However, the EEC was not satisfied, noting that the changes would take effect only in January 1988, and that labelling practices (against which the EEC had complained) would not change until January 1990.

The EEC complaint was supported also by Canada and the U.S. Canada, which said it was the third largest exporter to the Japanese market of whisky, said that despite the changes Canadian whisky would be taxed at much higher rates than other liquors.

A number of other countries – Australia, Argentina, Chile, Finland, and Yugoslavia – also expressed their intention to participate in the work of the panel.

On other, and equally long-pending complaints against Japan, the U.S. protested the long delay in naming the members of a panel and agreeing to the terms of reference over its complaint against Japanese restrictions on imports of certain agricultural products. A GATT spokesman said there had been difficulties in finding persons willing to serve on this panel.

But the U.S. said that its complain against Japan over import of some fish products, again an issue pending for quite some time and where Japan has been resisting panel adjudication, was not being pressed for the time being, since both parties have agreed to continue their bilateral consultations.

Earlier, the Council approved the terms of the protocol of accession of Morocco to the General Agreement, and the protocol was "put to vote". Thirty days after the protocol is assented to by two-thirds of the GATT membership (61 GATT Contracting Parties), Morocco would be able to sign the protocol and become the 93rd. Contracting Party.

The European Communities, under any other business, raised the levy by the U.S. of a customs user fee on all imports, and said at the next meeting of the Council the EEC would bring it up for reference to adjudication.

The U.S. levy is an ad valorem duty of 0.22 percent on all imports to be reduced later to 0.17 percent.

The General Agreement allows levies for services rendered, but insists that the fee must be commensurate with the service, and should not be either a revenue raising measure or a disguised protective import duty.

The EEC, supported by Canada, complained that the U.S. levy of an ad valorem fee was not commensurate with the services rendered on the imports by the U.S. customs, and thus violated GATT.

The U.S. however countered by arguing that the levy was fully in consonance with the relevant GATT provisions, and that the user fee was related to the approximate costs of the services rendered.

Also, the U.S. said, 17 GATT CPS levied customs user fees on an ad valorem basis, and these included France and Greece (within the EEC), as well as Brazil, Egypt, Hong Kong, Hungary, Mexico, New Zealand, Peru, Senegal, Switzerland, Tanzania, Turkey, Yugoslavia and Zambia.

Forty-seven other GATT CPS also levied some type of user fee.

Despite the U.S. argument, a number of other CPS supported the EEC complaint and expressed their interest. These included Australia, Japan, India, Switzerland, Singapore, Mexico, Chile, Peru and Indonesia.