International Economic Law and Policy Blog

Announcing a new paper on International Expositions Law

I would like to announce the availability of my new research paper on international expositions law. The title of this paper is Steve Charnovitz, "Why the International Exhibitions Bureau Should Choose Minneapolis for Global Expo 2023."  The Bureau of International Expositions (BIE) will be making this important decision in November 2017.  The working paper explains how the United States recently strengthened its bid by a remarkably rapid bipartisan action by the US Congress and Trump Administration to rejoin the BIE which the United States had quit in 2002. This paper also reviews the legislative history of US membership in the BIE treaty going back to 1968 and provides a brief overview of the role of the BIE in supervising world's fairs and expos going back to 1928. The BIE is an unusual treaty in having its own customs regime and in making decisions by a majority vote. The paper describes the three competing bids for the expo by Argentina, Poland, and the United States, and discusses the political and legal factors that may be in play in choosing the winning proposal. The paper explains why the bid by Minneapolis/United States is the superior proposal because of the salience and definiteness of its proposed theme of "Healthy People, Healthy Planet." The paper can be downloaded from SSRN at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3053623.

Financial University Organizes Conference on Russia and the WTO

On 19-20 May 2015, the Financial University of the Russian Federation held its first international conference on the topic of "WTO Law in the Legal System of the Russian Federation: Problems of Application and Teaching."  To my knowledge, this was the first international legal conference held to address the Russian Federation's 2012 accession to the World Trade Organization (WTO) and the current role of the Russian Federation in the WTO.  The Financial University under the Government of the Russian Federation (Finuniversitet) is a leading publicly-funded institution of higher professional education (whose roots go back to the early 20th century).  The conference was supported by a grant from the U.S. Russian Foundation for Economic Advancement and the Rule of Law (USRF).

The conference consisted of over two dozen presentations regarding international trade law and policy and the trade law of the Russian government. 

Among the main lecturers on the first day of the conference were: Jan Bohanes, senior counsel of the Advisory Centre on WTO Law (Geneva), who lectured on constructed normal value in antidumping; Professor Steve Charnovitz of George Washington University Law School (Washington, D.C.) who lectured on the WTO-plus provisions in the Russian WTO accession package; Professor Anatoly Kapustin, Head of the Legal Comparative Research Centre who lectured on Russia and WTO Law; Professor Vasilka Sancin of the University of Ljubljana who lectured on models for an appellate mechanism in investor-state dispute settlement; Anait Smbatyan, Senior Expert at the WTO Expertise Center (Moscow) who lectured on WTO implementation; Eric M. Solovy, partner at Sidley Austin LLP (Washington, DC) who lectured on the obligations of and caselaw under the WTO Agreement on Trade-Related Intellectual Property Rights (TRIPS) and the WTO Agreement Subsidies and Countervailing Measures (SCM).  Excellent additional presentations were made by Mark G. Pomar, President of USRF and by Professor and Deputy Rector Dmitry Sorokin of Finuniversitet.

On the second day of the conference, two parallel workshops were held featuring scientific presentations by leading academics and practitioners from Moscow and other Russian cities.  Several presentations addressed the challenges and opportunities of teaching international economic law to Russian students.  In addition, Professor Alexey N. Ruzhin of the Russian Foreign Trade Academy gave a lecture on the enforcement of international trade and customs law in the Russian economy.

Organizing a major global conference on WTO law is a difficult task and Financial University Associate Professor Igor Shulyatyev is to be commended for planning and carrying out a landmark conference on key policy and technical challenges facing the Russian government in its WTO membership.  In the future, the Financial University should consider building on its success and holding a second annual conference in 2016. 

Customs Classification at the CIT and the WTO

Multiple branches of government can be a real pain sometimes.

In the ongoing WTO EC - IT Products dispute (DS375, and also DS376 and DS377 brought by Japan and Chinese Taipei), the U.S. (that is, USTR) argued that the EC's reclassification of certain monitors in a way that led to higher duties was inconsistent with GATT Article II.  Here's a brief snippet of the claim from the U.S. first written submission:

55. Certain flat panel display devices were included in the ITA. Specifically, Attachment B of the ITA provides that participants shall “bind and eliminate” customs duties with respect to: Flat panel display devices (including LCD, Electro Luminescence, Plasma, Vacuum-Fluorescence and other technologies) for products falling within this agreement, and parts thereof.70

56. “Automatic data processing machines,” such as computers, “fall within” the ITA.71 Thus, this commitment includes flat panel display devices “for” computers – that is, flat panel computer displays such as LCD monitors. ...

...

58. FPDs [Flat Panel Displays] entered the EC duty-free for years after the ITA was concluded and implemented, as required by the EC’s tariff concessions under the ITA. Then,... the EC changed course and over a period of three years, from 2004 to 2007, adopted a series of measures that resulted in the end of lasting duty-free treatment for virtually all LCD flat panel display devices exported to the EC. ...

...

121. Based on the ordinary meaning in context of the terms in the EC’s Schedule, LCD monitors are “flat panel display devices...for products falling within this agreement.” A flat panel display device is “[a] video display with a shallow physical depth, based on technology other than the CRT (cathode-ray tube). Such displays are typically used in laptop computers. Common types of flat-panel displays are the electroluminescent display, the gas discharge display, and the LCD display.”166 In the ITA, the parenthetical following the terms “flat panel display devices” specifically identifies LCD flat panel display devices167 as one example of a flat panel display device. Computers (“automatic data processing machines”) are among the “products falling within” the ITA.168 LCD monitors “for” computers are therefore among the devices covered by the EC’s commitment with respect to flat panel display devices. Therefore, under the headnote, the EC and its member States are obliged to accord duty-free treatment to flat panel display devices for ITA products, and in particular LCD monitors, wherever they are classified.

...

122. Following implementation of the ITA, flat panel display devices such as LCD monitors imported into the EC were generally classified in CN line 8528 51 00 and its predecessor lines, and entered duty-free.169 CN 8528 51 00 covers monitors “[o]f a kind solely or principally used in an automatic data processing system of heading 8471”. However, as a result of several regulations and a CNEN adopted between 2004 and 2007, the EC and its member States began classifying certain FPDs under what is now CN code 8528 59 90170 and applying duties of 14% to these devices.

...

FN. 169 The EC renumbered CN 8471 60 90 to 8471 6 169 0 80, and later transposed the heading to CN 8528 51 00 as part of HS2007 implementation.

...

124. According to the EC, despite the fact that the LCD monitors in question were “mainly used” as computer monitors, the mere possibility that they could be connected to a source other than an computer meant that they were not covered by the ITA and therefore were not entitled to duty-free treatment. ...

125. In regulations and amendments to the CNENs issued by the EC in late 2005 and 2006, the EC took further steps to exclude flat panel display devices from duty-free treatment in the EC. In these measures, the EC identified particular characteristics shared by approximately half of all LCD flat panel display devices – in particular, the presence of a DVI connector – as the basis for excluding the device. ...

...

127. Several EC member States have issued BTIs reclassifying flat panel display devices as “video monitors” due to the presence of DVI. ...

...

140. As explained above, the EC and its member States have acted inconsistently with Article II:1(b) by imposing ordinary customs duties on “flat panel display devices” for ITA products in excess of the bound rate established in their Schedule. Consequently, consistent with the approach adopted by the Appellate Body in, for example, Argentina – Footwear, the measures also result in duty treatment less favorable than that provided in the EC Schedule, contrary to Article II:1(a) of GATT 1994.

That's a lot of details to digest, and perhaps not a perfectly clear extract.  In a nutshell, under the WTO Information Technology Agreement (ITA) the EC had been giving certain flat panel display monitors (including LCD monitors) duty-free treatment as computer monitors.  These monitors could be used for more than just computers, though, and the EC later reclassified them as video monitors, which were subject to a duty.  The U.S. alleged a violation of GATT Article II, arguing that the reclassification as video monitors was improper.  (The WTO panel ruling in this case should be out soon.)
 
Moving to another branch of government, the Court of International Trade (CIT) recently (March 1) issued the following decision in the BenQ Am. Corp. v. United States case on a similar classification issue:

In this action, Plaintiff BenQ America Corporation challenges the decision of the Bureau of Customs and Border Protection denying BenQ’s protest concerning the tariff classification of certain liquid crystal display (“LCD”) monitors imported from the People’s Republic of China in mid-May 2004.

...

The Government maintains that Customs properly classified the merchandise at issue – Dell™ 2001FP Flat Panel Color Monitors – as “video monitors” under heading 8528 of the Harmonized Tariff Schedule of the United States (“HTSUS”), assessing duties at the rate of five percent ad valorem.

...

BenQ contends that the monitors instead should have been classified as display units for automatic data processing (“ADP”) machines under HTSUS heading 8471, duty-free.

...

According to a study commissioned by BenQ, which surveyed purchasers of the monitor at issue (and a somewhat earlier model), “[a] very large majority (86.6 percent) of survey respondents . . . purchas[ed] the monitors . . . for use principally as a display unit for computer uses,” and “[a]n overwhelming majority (more than 99 percent of survey respondents)” were using the monitors with a computer.

...

[However,] as designed, manufactured, and imported, the monitors at issue are equipped to receive signals from both computers and other non-computer devices.

... Asserting that the “principal function” of the imported merchandise is “as a computer monitor,” BenQ contends that the merchandise should be classified under HTSUS heading 8471 (“Automatic data processing machines and units thereof”), duty-free, as BenQ claimed at the time of importation. ... In contrast, the Government maintains that Customs correctly classified the monitors under heading 8528 (“Reception apparatus for television . . .; video monitors and video projectors: Video monitors”), dutiable at the rate of five percent ad valorem, and that Customs’ denial of BenQ’s protest should therefore be sustained.

...

As set forth below, however, under Chapter 84 Note 5 (read in tandem with the relevant Explanatory Notes), the pivotal issue is instead whether the imported merchandise can “perform[ ] a specific function other than data processing” – or, stated differently, whether the monitors “are capable of accepting a signal only from the central processing unit [“CPU”]” of a computer (or whether they can also accept non-computer signals).

...

The imported monitors are thus classified under HTSUS heading 8528 under a straightforward GRI 1 analysis.

... the imported monitors cannot be classified as display “units” of “automatic data processing machines” under HTSUS heading 8471. See section III.B, supra. By the same token, it is undisputed that the monitors are video monitors. See section III.A, supra. As such, they are classifiable as “video monitors” under the broad eo nomine heading 8528, and thus were properly classified thereunder. See section III.A, supra. All that remains now is to ascertain the proper subheading.

...

Customs classified the monitors under subheading 8528.21.70, which covers “Reception apparatus for television, . . . ; video monitors . . . : Video monitors: Color: With a flat panel screen: Other: Other.” See Subheading 8528.21.70, HTSUS. Here, there is no claim by BenQ that some other subheading of heading 8528 more specifically describes the imported merchandise. An independent review of the potential subheadings confirms that, in fact, there is none. The monitors were thus properly classified under subheading 8528.21.70 of the HTSUS.

Again, sorry for the mangled extract, but if I'm reading this correctly, the CIT thinks that LCD monitors are properly classified as video monitors, rather than computer monitors (that is, "ADP" monitors).

Sifting through the customs classification reasoning in the CIT decision and the U.S. WTO submissions is a challenge for me.  Customs classification is not something I look at very often.  At first glance, though, it seems to me that the CIT position on classification is the opposite of what the U.S. argued to the WTO.  Maybe there's some way to reconcile the positions, but I don't see it.

Aside from the customs issues, what also interests me is whether the two proceedings will refer to each other.  Looking quickly through the various WTO submissions available online, I did not see a reference to the U.S. litigation.  But perhaps with the release of this CIT decision, it will begin to play a role.

ADDED:

Lawrence Friedman of the Customs Law Blog talks here about practical considerations resulting from a recent shuffle in the U.S. tariff schedule, which appears to bring the monitors in question back to duty-free status.

A Change in Tariff Classification (and Rates) for Solar Panels

From the NY Times:

The issue began with a short letter to United States customs officials last December from the small American subsidiary of a Spanish energy company. The subsidiary, GES USA, wanted to know what the tariff would be to import certain solar panels from China.

On Jan. 9, the customs agency wrote back that the panels had become too sophisticated to qualify for duty-free import. Instead — because the panels contain a basic electronic device for safety and energy efficiency — they would be treated as electric generators, subject to a duty of 2.5 percent.

Reuters has more and notes that the solar energy industy is trying to get the decision reversed:

The industry hopes it can persuade officials at U.S. Customs and Border Protection headquarters in Washington to overturn the ruling made by the New York office.

If that fails, the case could go to the U.S. Court of International Trade in New York.

I wonder if this will lead to a WTO complaint at some point.  There have been a few complaints over the years related to changes in tariff classification, including one going on right now against the EC on information technology products.  Such complaints can be difficult, though, in part because there are no explicit rules on classification (unlike customs valuation).  Instead, the GATT Article II provisions making the schedules of concessions operative are applied.  (For DSC subscribers, we discuss this a bit in a DSC blog post here). 

It probably makes sense to press the issue through domestic channels first, as the industry is doing. If they do not have any luck there, they may turn to the WTO.  The key will be the precise language of the U.S. WTO Schedule in relation to the product at issue.  I have not looked at this, so I don't have a good sense of such a claim's chance of success, but I assume the industry's trade lawyers have been checking it out.

ADDED: I think this is the ruling referenced in the article:

N047472
January 9, 2009
CLA-2-85:OT:RR:E:NC:N1:112 
CATEGORY:  Classification
TARIFF NO.: 8501.31.8000 
Mr. Jeffrey M. Young Moore & Van Allen, PLLC P.O. Box 13706 Research Triangle Park, NC 27709
RE:  The tariff classification of a Trinasolar TSM-175D solar module from China
Dear Mr. Young:

In your letter dated December 19, 2008, on behalf of GES USA Inc., you requested a tariff classification ruling.

The merchandise concerned is referred to as a Trinasolar TSM-175D solar module. This device consists of 72 interconnected monocrystalline silicon cells. These types of cells are known as photovoltaic cells. The 72 photovoltaic cells will be connected electrically and mounted in a photovoltaic module. In addition to the photovoltaic cells, these modules will incorporate by-pass diodes. The by-pass diodes allow current to pass around "shaded cells" and thereby reduce voltage loss. When a module becomes shaded, its by-pass diode becomes forward biased and begins to conduct current through itself. The diode also holds the entire shaded module or group of cells to a small negative voltage of approximately -0.7 volts, thus limiting the reduction in array output. 
These modules will not be connected to any other device when imported from China. Once imported, this module will be connected to several other modules to create a solar panel which will produce direct current electricity from the sun. The maximum output of these modules will be 175 watts.

You suggested that the Trinasolar TSM-175D solar module is classifiable under subheading 8541.40.6020 of the Harmonized Tariff Schedule of the United States (HTSUS).  Subheading 8541.40.6020 provides for "Diodes, transistors and similar semiconductor devices; photosensitive semiconductor devices, including photovoltaic cells whether or not assembled in modules…: Photosensitive semiconductor devices, including photovoltaic cells whether or not assembled in modules or made up into panels…: Other diodes: Other: Solar cells: Assembled into modules or made up into panels."  However, Explanatory Note (EN) 85.41 (B) (i) states that heading 8541 does not cover panels or modules equipped with elements, however simple, i.e. diodes to control the direction of the current.  As such, since the Trinasolar TSM-175D solar module does contain diodes, classification under subheading HTSUS 8541.40.6020 is inapplicable.

The applicable subheading for the Trinasolar TSM-175D solar module will be 8501.31.8000, Harmonized Tariff Schedule of the United States (HTSUS), which provides for "Electric motors and generators: Other DC motors; DC generators: Of an output not exceeding 750 W: Generators." The rate of duty will be 2.5%.

Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at http://www.usitc.gov/tata/hts/.

This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).

A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding heading 8541, please contact National Import Specialist Linda Hackett at (646) 733-3015. If you have any other questions regarding this ruling, please contact National Import Specialist Steve Pollichino at (646) 733-3008.

Sincerely, Robert B. Swierupski Director National Commodity Specialist Division