Bridges Weekly Trade News Digest • Volume 15 • Number 27 • 20th July 2011

WTO Disputes Roundup: Anti-dumping Twice Deemed Unfair; Second Panel in Ukraine-Moldova Spat

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Trade lawyers seem determined to clear their tables before the WTO’s annual summer break kicks in on 1 August. In addition to two new panels that were established today - for the Canada-Renewables panel see related story in this issue - the organisation released a final Appellate Body report in the EU-Fasteners dispute with China and a panel report on US anti-dumping duties on Vietnamese shrimp.

Second panel in Ukraine-Moldova row over beverages trade

Hardly one month after the WTO established a panel at Ukraine’s request over Moldova applying ‘environmental charges’ to the beverages sector (see Bridges Weekly, 1 June 2011) Moldova has followed suit with a dispute over Ukrainian excess taxes for foreign spirits (DS423).

Moldova claims that Ukraine applies higher taxes on exported distilled spirits compared to those charged on the domestic versions. Ukraine is an important export market for Moldovan spirits, especially since exports to Russia and Belarus - two non-WTO members - crashed in 2009.

Ukrainian tax codes make a distinction between Cognac and Brandy, with the latter being taxed at a rate more than twice as high as the one for Cognac. Only spirits produced in the province of Cognac in France or in Ukraine may be called Cognac, a requirement that results in higher taxes for other foreign products. Moldova claims that this distinction is artificial and that the products should be treated alike with the same tax rate.

The two disputes are closely related. In February of this year, Moldovan Deputy Minister of Economy Octavian Calmic said that “Moldova plans to synchronise the WTO examinations of the collection of the ecological duty from juice and beer producers by Moldova, with the problem of high excise taxes for Moldovan spirits.” While the Moldovan environmental charges apply to beer and orange juice, spirits and other beverage producers from Moldova are closely involved in the case against Ukraine.

Interestingly, the EU - which is known for being a defender of geographical indication rights - has voiced its own concerns over the use of the term ‘cognac’ in Ukrainian legislation and tax codes.

Anti-dumping disputes: Chinese Fasteners and Shrimp from Vietnam

With a report released on 15 July, the WTO backed China’s claim that EU antidumping duties imposed on metal fasteners from China were illegal (DS397). This confirms the reading of a previous panel. The Appellate Body ruled that the EU’s calculation methodology was unfair, as it assumed China to be a single exporter rather than treating individual companies separately.

China had brought the case on behalf of hundreds of producers that currently sell their fasteners up to fifty percent lower than their European counterparts.

In another anti-dumping dispute, Vietnam successfully challenged duties imposed by the US on Vietnamese frozen warm water shrimp (DS404). It was the first ever dispute for Vietnam, which continues to struggle with tighter anti-dumping measures imposed by other countries as a consequence of Vietnam’s non-market economy status.

For the moment, the case marks the last dispute in a series of cases on the controversial method of zeroing that the US uses in its antidumping investigations. The panel followed previous readings by the Appellate Body when dismissing zeroing for initial investigations and administrative reviews in anti-dumping procedures.

The practice of zeroing can result in higher duties that unfairly discriminate against affected exporters. This is particularly true for smaller countries where the difference can mean the difference between the imposition of anti-dumping duties and no additional costs. The US Department of Commerce had imposed the duties in February 2005, prior to Vietnam’s 2007 accession to the WTO.

ICTSD reporting; “Moldova is ready for official consultations with Ukraine in the framework of the WTO regarding the collection of the ecological duty from Ukrainian beer and juice suppliers,” PROFIT MOLDOVA, 27 February 2011.