Implementation of WTO Recommendations Concerning EC-Measures Concerning Meat and Meat Products (Hormones)

OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

[Docket No. 301-62a]

Implementation of WTO Recommendations Concerning EC-Measures

Concerning Meat and Meat Products (Hormones)

AGENCY: Office of the United States Trade Representative.

ACTION: Notice of the imposition of 100 percent ad valorem duties on

certain articles.

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SUMMARY: The United States Trade Representative (USTR) has decided to

suspend the application of tariff concessions and related obligations

by imposing a 100% ad valorem rate of duty on three articles described

in the Annex to this notice that are the products of certain member

States of the European Communities (EC) as a result of the EC's failure

to implement the recommendations and rulings of the World Trade

Organization (WTO) Dispute Settlement Body (DSB) concerning the EC's

ban on imports of U.S. meat from animals treated with certain hormones.

This action constitutes the exercise of U.S. rights under Article 22 of

the WTO Understanding on Rules and Procedures Governing the Settlement

of Disputes (DSU) and is taken pursuant to the authority granted to the

USTR under section 301 of the Trade Act of 1974, as amended..

EFFECTIVE DATE: In accordance with U.S. rights under the DSU, effective

July 29, 1999, a 100% ad valorem rate of duty shall be applied to the

articles described in the Annex to this notice that are the products of

one or more of the following EC member States--Austria, Belgium,

Denmark, Finland, France, the Federal Republic of Germany, Greece,

Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, or

Sweden--and that are entered, or withdrawn from warehouse, for

consumption on or after July 29, 1999. Any merchandise subject to this

determination that is admitted to U.S. foreign-trade zones on or after

July 29, 1999 must be admitted as ``privileged foreign status'' as

defined in 19 CFR 146.41. This action will follow authorization on July

26, 1999, by the DSB to suspend the application to the EC, and member

States thereof, of concessions and related obligations under the

General Agreement on Tariffs and Trade 1994 (GATT 1994).

ADDRESSES: 600 17th Street, NW., Washington, D.C. 20508.

FOR FURTHER INFORMATION CONTACT: Sybia Harrison, Staff Assistant to the

Section 301 Committee, (202) 395-3419, for questions concerning

documents and USTR procedures; William Busis, Associate General

Counsel, (202) 395-3150 or Ralph Ives, Deputy Assistant U.S. Trade

Representative, (202) 395-3320, for questions concerning WTO

developments regarding the EC's hormone ban; John Valentine, Attorney,

International Agreements Staff, U.S. Customs Service, (202) 927-1219,

for questions concerning classification; and Yvonne Tomenga, Program

Officer, Office of Trade Compliance, U.S. Customs Service, (202) 927-

0133, for questions concerning entries.

SUPPLEMENTARY INFORMATION: In December 1985, the EC adopted a directive

on livestock production restricting the use of natural hormones to

therapeutic purposes, banning the use of synthetic hormones, and

prohibiting imports of animals, and meat from animals, to which

hormones had been administered. That directive was later declared

invalid by the European Court of Justice on procedural grounds and

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had to be re-adopted by the Council, unchanged, in 1988 (``the Hormone

Director''). These measures, including the ban on the import of meat

and meat products produced from animals to which certain hormones had

been administered (the ``hormone ban''), because effective January 1,

1989.

Following entry into force on January 1, 1995, of the WTO Agreement

on the Application of Sanitary and Phytosanitary Measures (``SPS

Agreement''), the United States and, later, Canada, invoked formal WTO

dispute settlement proceedings against the hormone ban. Prior to the

establishment of the WTO panel, the EC replaced the Hormone Directive

with another directive that re-codified and expanded the hormone ban.

On May 20, 1996, the DSB established a dispute settlement panel (``the

WTO panel'') to examine the consistency of the hormone ban with the

EC's WTO obligations.

On August 18, 1997, the WTO panel issued its report finding that

the hormone ban is not based on scientific evidence, a risk assessment,

or relevant international standards, in contravention in of the EC's

obligations under the SPS Agreement. Upon an appeal to the WTO

Appellate Body, on January 16, 1998, the Appellate Body affirmed that

the hormone ban is not consistent with the EC's obligations under the

SPS Agreement. At a meeting held on February 13, 1998, the DSB adopted

the Panel and Appellate Body reports regarding the EC's hormone ban.

The EC subsequently requested four years to implement the DSB

recommendations. The United States could not agree to this proposed

implementation period, and the matter was referred to a WTO arbitrator.

The arbitrator determined that the reasonable period of time for

implementation was fifteen months, and would expire on May 13, 1999.

The EC did not implement the DSB recommendations and rulings

regarding its hormone ban by May 13, 1999. Accordingly, on May 17,

1999, and in accordance with U.S. rights under Article 22 of the DSU,

the United States requested authorization from the DSB to suspend the

application to the EC, and member States thereof, of tariff concessions

and related obligations under the GATT covering trade in an amount of

$202 million. The EC objected to the level of suspension proposed by

the United States, and claimed that the trade damage suffered by the

United States was only $53 million. Pursuant to Article 22.6 of the

DSU, the matter was referred to arbitration. The DSU provides that such

arbitrations must be completed within 60 days of the end of the

reasonable period of time for implementation, or in this case, by July

12, 1999.

The arbitrators issued their final decision on July 12, 1999, and

determined that the level of nullification or impairment suffered by

the United States as a result of the EC's WTO-inconsistent hormone ban

was $116.8 million per year. Accordingly, upon DSB authorization, the

United States is entitled under the DSU to suspend the application to

the European Communities and its member States of tariff concessions

and related obligations under the GATT covering trade up to that

amount. A meeting of the DSB is scheduled for July 26, 1999, at which

time the DSB, pursuant to Article 22.7 of the DSU, will grant

authorization for such suspension of concessions.

Prior Notice and Comment

On March 25, 1999, the USTR announced preparations for exercising

its right to request authorization to suspend tariff concessions on EC

products if the EC failed to implement the DSB's recommendations and

rulings concerning the EC's hormone ban by May 13, 1999. (64 FR

14,486). The March 25 notice sought public comment on a preliminary

list of EC products with respect to which the United States was

considering the suspension of tariff concessions. On April 19, 1999,

USTR conducted a public hearing to receive testimony on the preliminary

list.

Determination and Action

As a result of the EC's failure to implement the recommendations

and rulings of the DSB concerning the EC's hormone ban, and pursuant to

the WTO arbitrators' decision of July 12, 1999 and the authorization of

the DSB on July 26, 1999, the USTR will suspend tariff concessions and

related obligations under the GATT 1994 by imposing a 100% ad valorem

rate of duty on the articles described in the Annex to this notice that

are the products of certain EC member States. The amount of trade

affected by this action, as measured by an average of 1996-1998 import

values, is equivalent to the level of nullification or impairment

($116.8 million) determined by the WTO arbitrators in their decision of

July 12, 1999.

This action exercises the rights of the United States under Article

22 of the DSU and is taken pursuant to the authority granted to the

USTR under section 301 of the Trade Act. The articles affected by this

determination were selected in light of the comments submitted to the

Section 301 Committee in response to the March 25, 1999 notice and the

testimony presented at the public hearing held on April 19, 1999.

Accordingly, effective July 29, 1999, with respect to articles that

are the products of one or more of the following EC member States--

Austria, Belgium, Denmark, Finland, France, the Federal Republic of

Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal,

Spain, or Sweden--and that are entered, or withdrawn from warehouse,

for consumption on or after July 29, 1999, the Harmonized Tariff

Schedule of the United States is hereby modified in accordance with the

Annex to this notice. Any merchandise subject to this determination

that is admitted to U.S. foreign-trade zones on or after July 29, 1999

must be admitted as ``privileged foreign status'' as defined in 19 CFR

146.41.

William L. Busis,

Chairman, Section 301 Committee.

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