2011-13282. Termination of Action and Further Monitoring in Connection With the EC-Beef Hormones Dispute

AGENCY:

Office of the United States Trade Representative.

ACTION:

Notice, termination of action, and further monitoring.

SUMMARY:

In July 1999, pursuant to authority under Section 301 of the Trade Act of 1974, as amended (the Trade Act), and as authorized by the Dispute Settlement Body (DSB) of the World Trade Organization (WTO), the United States Trade Representative (Trade Representative) imposed additional duties on certain products of member states of the European Union (EU) as a result of the EU's failure to comply with the recommendations and rulings of the DSB in the EC-Beef Hormones dispute. In January 2009, the Trade Representative announced a determination to modify the list of products subject to additional duties by removing some products from the list of products subject to additional duties, and by adding replacement products. The January modification had an initial effective date of March 23, 2009. The Trade Representative subsequently delayed the additional duties on the replacement products in order to promote negotiations with the EU. The removal of products was not delayed. As a result, as of March 23, 2009, the additional duties applied only to a reduced list of products, consisting of those products covered in the original 1999 list that had not been subject to replacement. On May 13, 2009, the United States and the EU announced the signing of a Memorandum of Understanding (MOU) in the EC-Beef Hormones dispute. The MOU provides for the EU to make phased increases in market access by adopting a tariff-rate quota (TRQ) for certain beef products, in return for the United States making phased reductions in the additional duties. Under the first phase of the MOU, in August 2009 the EU opened up a TRQ in the amount of 20,000 metric tons, and the Trade Representative terminated the additional duties on the replacement products. (Those additional duties had been announced in January 2009 but had never entered into force.) The Trade Representative's action left in place a reduced list of products subject to additional duties. The MOU provides for the possibility of the United States and the EU to enter into a second phase starting in August 2012, in which the EU would increase the TRQ to 45,000 metric tons, and the United States would lift the remaining additional duties. As a result of a decision of the United States Court of Appeals for the Federal Circuit, the Trade Representative has determined to terminate the remaining additional duties in advance of the August 2012 start date of the possible second phase of the MOU. The United States continues to have an authorization from the WTO DSB, and the right under the MOU, to suspend concessions on EU products. At this time, however, the MOU is operating successfully by providing increased market access to U.S. beef producers. In light of the currently successful implementation of the MOU, the fact that all additional duties would have to be removed in August 2012 under a possible second phase of the MOU, and to encourage continued cooperation under the MOU, the Trade Representative has determined not to take steps at this time to exercise U.S. rights to impose additional duties on EU products in connection with the EC-Beef Hormones dispute. The Trade Representative will continue to monitor EU implementation of the MOU and other developments affecting market access for U.S. beef products. If EU implementation and other developments do not proceed as contemplated, the Trade Representative will consider additional actions under Section 301 of the Trade Act.

DATES:

Effective Date: The remaining additional duties imposed in connection with the EC-Beef Hormones dispute are terminated with respect to (a) Products that are entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice, (b) unliquidated entries made prior to the date of publication of this notice that were entered, or withdrawn from warehouse, for consumption after July 29, 2007, and (c) products that were entered, or withdrawn from warehouse, for consumption after July 29, 2007, where the liquidation of the entry is not final.

FOR FURTHER INFORMATION CONTACT:

Roger Wentzel, Director, Agricultural Affairs, [phone], or David Weiner, Deputy Assistant USTR for Europe, [phone], for questions concerning the EC-Beef Hormones dispute or the MOU; or William Busis, Deputy Assistant USTR for Monitoring and Enforcement and Chair of the Section 301 Committee, [phone], for questions concerning procedures under Section 301. Questions concerning customs matters may be directed to Laurie Dempsey, Branch Chief, Entry, Summary, and Drawback, Office of International Trade, U.S. Customs and Border Protection, 202-863-6509.

SUPPLEMENTARY INFORMATION:

A. Background

In 1998, the WTO DSB found that the EU's ban on beef produced from animals to which certain hormones have been administered was inconsistent with the EU's obligations under the WTO Agreement. The DSB recommended that the EU bring its measures into compliance. In July 1999, WTO arbitrators determined that the level of nullification or impairment suffered by the United States as a result of the EU's WTO-inconsistent hormone ban was $116.8 million per year. The WTO DSB authorized the United States to suspend the application to the EU and its member states of tariff concessions and related obligations under the GATT covering trade up to this amount. In a notice published on July 27, 1999, the Trade Representative announced that the United States was exercising this authorization by imposing 100 percent ad valorem duties on a list of certain products of certain EU member states.

Section 307(c) of the Trade Act provides for the Trade Representative to conduct a review of a Section 301 action four years after the action was taken. During 2008, the U.S. Court of International Trade held that the Trade Representative must also conduct a Section 307(c) review eight years after the action was taken. See Gilda Industries v. United States, 556 F. Supp. 2d 1366 (Ct. Int'l Trade 2008).

The first step in a Section 307(c) review is for USTR to request that the U.S. industry benefitting from the action submit a written confirmation that the action should be continued. If the U.S. industry requests continuation, the statute provides for USTR to review the effectiveness of the action. On remand from the U.S. Court of International Trade, USTR requested and received from the U.S. beef industry a written confirmation that it wanted the July 1999 action to continue, and USTR proceeded to conduct a review of the effectiveness of the July 1999 action.

In January 2009, USTR announced, and reported to the U.S. Court of International Trade, the results of the Section 307(c) review undertaken in the remand proceeding. The Trade Representative decided to modify the action taken in July 1999 by: (1) Removing some products from the list of products subject to 100 percent ad valorem duties since July 1999; (2) imposing 100 percent ad valorem duties on some new products from certain EU member States; (3) modifying the coverage with respect to particular EU member States; and (4) raising the level of duties on one of the products that was being maintained on the product list. The effective date of the modifications was to be March 23, 2009.

In March 2009, the Trade Representative decided to delay the effective date of the additional duties (items two through four above) imposed under the January 2009 modifications in order to allow additional time for reaching an agreement with the EU that would provide benefits to the U.S. beef industry. The effective date of the removal of duties under the January modifications remained March 23, 2009. Accordingly, after March 23, 2009, the additional duties imposed in July 1999 remained in place on a reduced list of products. That reduced list of products subsequently was reprinted in the Annex of the notice published on September 24, 2009. See 74 FR 48808 (September 24, 2009).

In May 2009, the United States and the EU announced the signing of an MOU in the EC-Beef Hormones dispute. In the first phase of the MOU, the EU is obligated to open a new TRQ in the amount of 20,000 metric tons at zero rate of duty for beef not produced with certain growth-promoting hormones. The United States in turn is obligated not to increase additional duties above those in effect as of March 23, 2009.

Under the terms of the MOU, the MOU's first phase concludes on August 3, 2012. Should the United States and the EU enter into the second phase of the MOU, the EU would be required to increase the beef TRQ to 45,000 metric tons, and the United States would be required to suspend all of the additional duties imposed in connection with the EC-Beef Hormones dispute.

In June 2009, the U.S. Court of International Trade rejected the results of the Section 307(c) review undertaken in the remand proceeding. The court found that the July 1999 action under Section 301 terminated as a matter of law after eight years (on July 29, 2007) because representatives of the U.S. beef industry did not submit a written request for a continuation of the action prior to July 29, 2007. See Gilda Industries v. United States, 625 F. Supp. 2d 1377 (Ct. Int'l Trade 2009). The United States appealed the decision to the U.S. Court of Appeals for the Federal Circuit.

In August 2009, the EU opened the new beef TRQ in accordance with the terms of the MOU. In September 2009, the Trade Representative implemented U.S. obligations under the first phase of the MOU by terminating the additional duties that were announced in January 2009 but had been delayed up to that time and had never entered into force. The September 2009 action left in place the additional duties that had been in effect since March 23, 2009 on a reduced list of products.

In October 2010, the U.S. Court of Appeals for the Federal Circuit affirmed the June 2009 decision of the U.S. Court of International Trade that the July 1999 action terminated as a matter of law on July 29, 2007. See Gilda Industries, Inc. v. United States, 622 F.3d 1358 (Fed. Cir. 2010).

In March 2011, Canada and the EU entered into an MOU in connection with the EC-Beef Hormones dispute, in which Canada was a co-complainant with the United States. The Canada-EU MOU provides for additional amounts in the TRQ specified in the U.S.-EU MOU: 1,500 metric tons in the first phase, and 3,200 metric tons in a possible second phase starting in August 2012.

For additional background concerning the EC-Beef Hormones WTO dispute, the additional duties imposed in connection with the dispute, and the May 2009 MOU, see 64 FR 40638 (July 27, 1999), 73 FR 66066 (Nov. 6, 2008); 74 FR 4265 (Jan. 23, 2009), 74 FR 11613 (March 18, 2009), 74 FR 12402 (March 24, 2009), 74 FR 19263 (April 28, 2009), 74 FR 22626 (May 13, 2009), 74 FR 40864 (August 13, 2009); and 74 FR 48808 (September 24, 2009), as well as the WTO Web site (http://www.wto.org) under dispute numbers DS26 and DS48.

B. Termination of the Remaining Additional Duties

As a result of the decision of the U.S. Court of Appeals for the Federal Circuit, the Trade Representative has decided to terminate the additional duties imposed in connection with the EC-Beef Hormones dispute, effective with respect to (a) products that are entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice, (b) products that were entered, or withdrawn from warehouse, for consumption after July 29, 2007 where the entry is unliquidated on the date of publication of this notice, and (c) products that were entered, or withdrawn from warehouse, for consumption after July 29, 2007, where the liquidation of the entry is not final. In particular:

(i) The imposition of 100 percent ad valorem duties as provided in subheadings 9903.02.21, 9903.02.22, 9903.02.23, 9903.02.24, 9903.02.25, 9903.02.26, 9903.02.27, 9903.02.28, 9903.02.29, 9903.02.30, 9903.02.32, 9903.02.34, 9903.02.43, 9903.02.44, 9903.02.45, and 9903.02.46 of the Harmonized Tariff Schedule of the United States (HTSUS) is terminated with respect to (a) Products that are entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice, (b) unliquidated entries made prior to the date of publication of this notice that were entered, or withdrawn from warehouse, for consumption after July 29, 2007, and (c) products that were entered, or withdrawn from warehouse, for consumption after July 29, 2007, where the liquidation of the entry is not final;

(ii) The imposition of 100 percent ad valorem duties as provided in subheading 9903.02.83 of the HTSUS is terminated with respect to (a) products that are entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice, (b) unliquidated entries made prior to the date of publication of this notice that were entered, or withdrawn from warehouse, for consumption on or after March 23, 2009, and (c) products that were entered, or withdrawn from warehouse, for consumption on or after March 23, 2009, where the liquidation of the entry is not final;

(iii) The imposition of 100 percent ad valorem duties as provided in subheadings 9903.02.31, 9903.02.33, 9903.02.35, 9903.02.36, 9903.02.37, 9903.02.38, 9903.02.39, 9903.02.40, 9903.02.41, 9903.02.42, and 9903.02.47 of the HTSUS is terminated with respect to (a) unliquidated entries made after July 29, 2007 and before March 23, 2009, and (b) products that were entered, or withdrawn from warehouse, for consumption after July 29, 2007 and before March 23, 2009 where the liquidation of the entry is not final;

(iv) The above-listed subheadings, along with any associated superior headings or subheadings, are deleted from the HTSUS, effective on the date of publication of this notice; and

(v) As of the date of publication of this notice, products in subheadings 9903.02.21, 9903.02.22, 9903.02.23, 9903.02.24, 9903.02.25, 9903.02.26, 9903.02.27, 9903.02.28, 9903.02.29, 9903.02.30, 9903.02.32, 9903.02.34, 9903.02.43, 9903.02.44, 9903.02.45, 9903.02.46 and 9903.02.83 of the HTSUS that are entered into a Foreign Trade Zone no longer must be admitted in “privileged foreign status,” as defined in 19 C.F.R. 146.41.

C. Continued Monitoring and Implementation of the MOU

Until the entry into force of the possible second phase of the MOU in August 2012, the United States retains the right under the MOU to impose additional duties on the reduced list of products subject to additional duties after March 23, 2009 (reprinted in the Annex of the notice published on September 24, 2009). The United States also continues to have an authorization from the WTO DSB to suspend concessions on EU products in the amount of $116.8 million per year. At this time, however, the MOU is operating successfully by providing increased market access to U.S. beef producers. In light of the currently successful implementation of the MOU, the fact that all additional duties would have to be removed in August 2012 under a possible second phase of the MOU, and to encourage continued cooperation under the MOU, the Trade Representative has determined not to take steps at this time to exercise U.S. rights to impose additional duties on EU products in connection with the EC-Beef Hormones dispute.

The Trade Representative will continue to monitor EU implementation of the MOU and other developments affecting market access for U.S. beef products. If implementation of the MOU and other developments do not proceed as contemplated, the Trade Representative will proceed to consider additional actions under Section 301 of the Trade Act.

William Busis,

Chair, Section 301 Committee.