Request for Comments and Notice of Public Hearing on Potential Withdrawal of Tariff Concessions and Increase in Applied Duties in Response to European Union (EU) Enlargement and EU Changes to Its Rice Import Regime

AGENCY:

Office of the United States Trade Representative.

ACTION:

Request for comments and notice of public hearing concerning a list of goods for which tariff concessions may be withdrawn and duties may be increased in the event the United States cannot reach agreement with the European Union (EU) for adequate compensation owed under World Trade Organization (WTO) rules as a result of EU enlargement and EU changes to its rice import regime.

SUMMARY:

The United States is continuing to negotiate with the EU regarding the EU's provision of adequate and permanent compensation to the United States for two recent EU actions that have increased duties on U.S. imports to EU markets above WTO bound rates of duty. On May 1, 2004, as part of its enlargement process, the EU raised tariffs above bound rates on some imports into the countries of Estonia, Latvia, Lithuania, Poland, Slovakia, the Czech Republic, Slovenia, Hungary, Cyprus and Malta. In addition, on September 1, 2004, the EU changed its rice import regime, raising tariffs on some rice imports above the maximum permissible WTO rate of duty. If either or both of these issues are not resolved, the United States may seek to exercise its rights under Article XXVIII of the General Agreement on Tariffs and Trade 1994 (“GATT 1994”) to withdraw substantially equivalent concessions and raise tariffs on select goods primarily supplied by the EU. The Trade Policy Staff Committee (TPSC) seeks public comment on the attached list of goods for which U.S. tariff concessions may be withdrawn and applied duties may be raised. The TPSC will hold a public hearing on Friday, September 24, 2004, on the list which may be used for either or both of these issues.

DATES:

Persons wishing to testify orally at the hearing must provide written notification of their intention, as well as a copy of their testimony, by noon on Friday, September 17, 2004. A hearing will be held in Washington, DC on Friday, September 24, 2004. Written comments are due by noon on Tuesday, September 28, 2004.

ADDRESSES:

Submissions by electronic mail to FR0443@ustr.eop.gov; requests to testify should also be addressed to Anita Thomas, Secretary, Office of Europe and the Mediterranean, Office of the United States Trade Representative, at email: anita_thomas@ustr.eop.gov. Submissions by facsimile to: Anita Thomas at fax: (202) 395-3974. The public is strongly encouraged to submit documents electronically rather than by facsimile. (See requirements for submissions below).

FOR FURTHER INFORMATION CONTACT:

For questions about participation in the hearings, contact Anita Thomas at (202) 395-3320. For procedural questions concerning written comments, contact Laurie Molnar, Director for European and Mediterranean Trade Issues, at (202) 395-3320. All other questions should be directed to: Laurie Molnar, (202) 395-3320; Sharon Sydow, Director Agricultural Trade Policy, (202) 395-5414; or Tiffany Smith, Director for Market Access (202) 395-5656; Office of the United States Trade Representative.

SUPPLEMENTARY INFORMATION:

Under WTO rules, the United States is entitled to compensation from the EU resulting both from EU tariff changes as a result of EU enlargement and EU changes to its rice import regime. If agreement on compensation cannot be reached on either or both of these issues, the United States would be entitled to withdraw substantially equivalent concessions and apply increased duties on products of interest to the EU. In addition to the information presented below on these EU actions, relevant WTO rules, and domestic procedures, additional supplemental information on the EU enlargement tariff compensation negotiations and the rice margin of preference issues can be found on the Office of the U.S. Trade Representative's Web site at: http://www.ustr.gov/World_Regions/Europe_Mediterranean/European_Union/Section_Index.html.

Enlargement: With the accession to the EU of Estonia, Latvia, Lithuania, Poland, Slovakia, the Czech Republic, Slovenia, Hungary, Cyprus and Malta (“the new EU Member States”), the EU withdrew the entire WTO tariff schedules of the new EU Member States and applied the common external tariff of the EU of fifteen to imports into the territory of the new EU Member States, resulting in increased tariffs on certain products.

Rice Import Regime Changes: As part of reforms to its Common Agricultural Policy, on September 1, 2004, the EU replaced its rice import regime, called the Margin of Preference, with a specific duty of 65 Euros/MT for husked (brown) rice. The United States is a major supplier of brown rice to the EU. Tariffs were also changed for milled rice.

Legal Background: Article XXVIII of the GATT 1994 establishes that a WTO Member may modify or withdraw a tariff concession bound in its WTO schedule by negotiation and agreement with certain affected Members, more specifically, those Members that initially negotiated the relevant concession or are determined to have a principal supplying interest or a substantial interest in the concession. Such affected Members are entitled to receive adequate compensation or, in the absence of successful compensation negotiations, to withdraw “substantially equivalent concessions.” Pursuant to Article XXIV:6 of the GATT 1994, where a WTO Member has modified or withdrawn a concession in the expansion of a customs union, the procedure under Article XXVIII also applies. The United States has negotiating and compensation rights on certain tariff concessions at issue under both of the EU actions described above.

Affected WTO Members' rights to withdraw substantially equivalent concessions under Article XXVIII are time-limited; these rights expire within six months of the EU's withdrawal or modification of concessions unless exercised or extended. WTO Members intending to withdraw substantially equivalent concessions must provide notice to the WTO of their intent at least thirty days prior to the effective date of such action.

Whenever a foreign country withdraws, suspends, or modifies the application of trade agreement obligations of benefit to the United States without granting adequate compensation, the President is authorized under section 125(d) of the Trade Act of 1974 (19 U.S.C. 2135) to withdraw, suspend or modify the application of any substantially equivalent trade agreement obligations of benefit and proclaim under section 125(c) such increased duties or other import restrictions as are appropriate to effect adequate compensation. Section 125(c) authorizes the President to proclaim increased duties or other import restrictions as he deems necessary or appropriate in order to exercise the rights of the United States whenever the United States, acting in pursuance of its rights or obligations under certain trade agreements, withdraws, suspends or modifies any obligation with respect to foreign trade. Section 125(f) provides that the President, normally before taking any action under section 125 to withdraw, suspend, or modify trade agreement obligations or to increase duties, must provide for a public hearing, at which time interested persons will be given an opportunity to be present, to produce evidence, and to be heard.

Pursuant to section 125(c), any new tariff rates proclaimed by the President would not exceed 50 percent above the rate set forth in rate column numbered 2 of the Tariff Schedules of the United States, as in effect on January 1, 1975, or 20 percent ad valorem above the rate existing on January 1, 1975, whichever is higher. If imposed, the increased duties would apply to imports from all countries that are subject to the rates of duty set forth in the Column 1 General rate of duty column of the Harmonized Tariff Schedule of the United States (HTSUS). The products affected by a suspension of concessions and duty increase would be drawn from the list of products set forth in the Annex to this notice. In recommending any action to the President under section 125, the TPSC will consider all comments and testimony by interested persons submitted in accordance with the procedures described below.

Public Comment on Potential Actions; Hearing Participation

Pursuant to section 125(f) of the Trade Act of 1974 (19 U.S.C. 2135), the TPSC, chaired by the Office of the United States Trade Representative, has scheduled a public hearing beginning at 9 a.m. on Friday, September 24, 2004, in Room 1, 1724 F Street, NW., Washington, DC, 20508. Further details on the hearing and submission of testimony is provided below. In lieu of or in addition to participation at the public hearing, parties may submit written comments to be received no later than noon, Tuesday, September 28, 2004.

Written comments and/or written or oral testimony of interested persons should be limited to the following issues: (1) The appropriateness of withdrawing WTO tariff concessions upon the products listed in the Annex to this notice; (2) the appropriateness of imposing increased duties upon the products listed in the Annex to this notice; (3) the levels at which U.S. customs duties should be set for particular items; and (4) the degree to which increased duties might have an adverse effect upon U.S. consumers of the products listed in the Annex.

Persons wishing to testify orally at the hearing must provide both a written notification of their intention and a copy of their testimony by noon on Friday, September 17, 2004. The notification should include: (1) The name, address, and telephone number, fax number, and firm or affiliation of the person wishing to testify; (2) a short (one or two paragraph) summary of the oral presentation; and (3) list of goods of interest (including HTSUS numbers). Remarks at the hearing should be limited to no more than five minutes to allow for possible questions from the TPSC.

Requirements for Submissions

In order to facilitate prompt processing of submissions, the TPSC strongly urges and prefers electronic (e-mail) submissions in response to this notice. In the event that an e-mail submission is impossible, submissions should be made by facsimile.

Persons making submissions by e-mail should use the following subject line: “EU Enlargement/EU Rice Import Regime” followed by (as appropriate) “Written Comments,” “Notice of Testimony,” or “Testimony.” Documents should be submitted as either Adobe PDF, WordPerfect, MSWord, or text (.TXT) files. Supporting documentation submitted as spreadsheets are acceptable as Quattro Pro or Excel. For any document containing business confidential information submitted electronically, the file name of the business confidential version should begin with the characters “BC-”, and the file name of the public version should begin with the characters “P-”. The “P-” or “BC-” should be followed by the name of the submitter. Persons who make submissions by e-mail should not provide separate cover letters; information that might appear in a cover letter should be included in the submission itself. Similarly, to the extent possible, any attachments to the submission should be included in the same file as the submission itself, and not as separate files.

Written comments, notices of testimony, and testimony will be placed in a file open to public inspection pursuant to 15 CFR 2003.5, except confidential business information exempt from public inspection in accordance with 15 CFR 2003.6. Confidential business information submitted in accordance with 15 CFR 2003.6 must be clearly marked “BUSINESS CONFIDENTIAL” at the top of each page, including any cover letter or cover page, and must be accompanied by a non-confidential summary of the confidential information. All public documents and non-confidential summaries shall be available for public inspection in the USTR Reading Room. The USTR Reading Room is open to the public, by appointment only, from 10 a.m. to 12 noon and 1 p.m. to 4 p.m., Monday through Friday. An appointment to review the file may be made by calling (202) 395-6186. Appointments must be scheduled at least 48 hours in advance.

General information concerning USTR may be obtained by accessing its Internet Web site ( http://www.ustr.gov ).

** Actual rates to be released on the Office of the U.S. Trade Representative's Web site at: http://www.ustr.gov/World_Regions/Europe_Mediterranean/European_Union/Section_Index.html. Tariff rates would not exceed 50 percent above the rate set forth in rate column numbered 2 of the Tariff Schedules of the United States, as in effect on January 1, 1975, or 20 percent ad valorem above the rate existing on January 1, 1975, whichever is higher.