Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm.

What Does the WTO ITA Ruling Mean for Exports to Europe? 

Jasper HelderPartner, Customs & International TradeBaker & McKenzie, AmsterdamJasper.helder@bakermckenzie.com+ 31 20 551 75 79

Webinar, October 14, 2010

2

Agenda

– The ITA and the dispute– The WTO Panel Ruling– The legal effect of the Ruling in Europe– Affected European rules– The implementation of the Panel ruling– Are there any remedies for importers for past and present

customs duties paid?– Q & A

3

The ITA

4

Information Technology Agreement (“ITA”)

– 1996: 14 WTO members (incl. EU)– To promote the key role of trade in the development of

information industries– Elimination of customs duties for IT products, no later than

1 January 2000– Annex A: identifies IT products covered by HS Heading

(4-digit level)– Annex B: identifies IT products covered by description

(regardless of HS classification)

5

Information Technology Agreement (“ITA”)

– IT products covered:– Semiconductors, materials, manufacturing and testing

equipment– Calculators, cash registers, accounting machines,

translation machines, franking machines– Computers (“automatic data processing machines”),

components and related equipment (including network equipment)

– Telecommunication devices, components and equipment

6

The dispute

7

The parties

– Complainants:– United States of America– Japan– Taiwan

– Respondents:– European Union

8

Background to the dispute

– European Union Common Customs Tariff and related classification regulations and decisions

– Flat Panel Display Devices (“FDP”): 14 % unless solely or principally for use with computers: 0 %

– Multifunctional Digital Machines (notably multifunctional printers/faxes/scanners, “MFM”): 6 %

– Set-Top Boxes with communication function (“STBC”): 14 % when comprising additional functions (recording)

9

ITA

– FDP: Annex B: “(including LCD, Electro luminescense, Plasma and other technologies) for products falling within this agreement, and parts thereof”, Annex A: Input/output units for computers

– MFM: Annex A: Input/output units for computers

– STBC: Annex B: "Set top boxes which have a communication function: a microprocessor based device incorporating a modem for gaining access to the Internet and having a function of interactive information exchange"

10

Panel conclusions

11

FDP

– The Panel found that ITA covers:– An array of non-CRT technologies, including LCD– No limitations with regard to connectors/sockets– No requirement that FDP may only connect with

computer– Ability to display signals from sources other than

computer does not exclude FDP from zero rate, but:– The mere capability to receive signals from

computers is not enough

12

FDP

– The Panel found that:– EU Regulation 179/2009 (introducing a 14 % tariff for

some FDP) in conjunction with EU Common Customs Tariff 2007/2008 and EU Classification Regulations 634/2005 and 2171/2005, is inconsistent with ITA

– Regardless of the suspension of the 14% tariff in EU Regulation 179/2009

13

MFM

– The Panel found:– the EU classified certain MFM for computers in dutiable

headings, which is not consistent with ITA– EU Classification Regulations 517/1999, 400/2006 and

the relevant headings of the EU Common Customs Tariff are inconsistent with ITA.

14

STBC

– The Panel defined the STBCs at issue:– Devices that enable a video monitor or television to

receive and decode digital television broadcasts from a communication channel, which are capable of connecting to the Internet through an in-built WLAN, ISDN or Ethernet device, and

– STBCs which comprise a recording or reproducing function, such as a hard disk or DVD drive.

15

STBC

– The Panel found that EU Explanatory Notes require:– STBCs with recording or reproducing function and with

ISDN, WLAN or Ethernet technology to be classified outside the scope of the duty-free EU heading, and

– to classify those STBCs in dutiable headings respectively requires duties to apply to at least some STBCs covered under ITA

– Thus the EU Common Customs Tariff and Explanatory Notes operating together are inconsistent with ITA

16

Legal effect in Europe

17

Legal effect in Europe

– WTO Agreements in principle do not have direct effect– Importers can not directly rely on WTO Agreements– Importers can not rely directly on Panel reports (?)

– European Court of Justice (“ECJ”) can however examine validity of EU legislation which– Directly implements WTO Agreements– Explicitly refers to WTO Agreements

18

Legal Effect in Europe

– Pending Question before ECJ:

– Can an importer rely on a WTO DSB Panel report with regard to the examination of the validity of EU Regulations, also in respect of the interpretation of headings of the EU Common Customs Tariff concerning imports prior to the WTO Panel report?

19

Possible EU implementation

20

Possible EU implementation

– Reasonable period of time, to be negotiated– No agreement: arbitration within 90 days after adoption of

DSB Panel report– Guideline: 15 months maximum implementation period

21

Possible EU implementation

– Amendment of the EU Common Customs Tariff to reflect Panel report conclusions

– Withdrawal of EU (Classification) Regulations inconsistent with ITA

– Withdrawal of EU Binding Tariff Information (“BTI”) inconsistent with ITA?– BTI relies on EU Regulations, which are still in effect

unless found unvalid by ECJ/withdrawn– BTI holder would have to rely directly on Panel report to

challenge BTI (direct effect?)

22

Possible EU Implementation

– FDP: European Communities indicated that Classification Regulations 634/2005 and 2171/2005 would be withdrawn 

– MFM: EU indicated that Classification Regulations 517/1999 and 400/2006 would be withdrawn as of October 2009. 

23

Remedies for ITA importers in Europe?

24

Possible remedies (past)– Application for repayment of customs duties (Article 236

EU Customs Code):– 3 years– “Import duties shall be repaid in so far as it is

established that when they were paid the amount of such duties was not legally owed”

25

Possible remedies (present and future)

– Appeal against assessments resulting from current and future imports– Administrative review by customs– Followed by judicial review

26

Conclusions (?)

27

Conclusions

– Direct application of Panel report findings:– “No go”

– Indirect application of Panel report finding:– ECJ case law supports that the ECJ could declare

relevant EU (Classification) Regulations unvalid due to inconsistency with ITA and EU WTO obligations

– Which depends on questions currently pending before ECJ

28

Conclusions

– To protect interests pending ECJ question on status DSB Panel reports:– Past: submit repayment applications– Present & future: challenge assessments

– Practical issues:– Customs can progress cases with denials, requiring subsequent

appeals– “Automatic challenge” of assessments is not available in all EU

countries and suspends statute of limitations for customs challenging your entries on different grounds (e.g. Value)

Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm.

What Does the WTO ITA Ruling Mean for Exports to Europe? 

Jasper HelderPartner, Customs & International TradeBaker & McKenzie, AmsterdamJasper.helder@bakermckenzie.com+ 31 20 551 75 79

Webinar, October 14, 2010