May 30, 2011

 

US to end retaliation on EU beef hormone dispute

 

 

As a result of an adverse US court ruling, the US has announced on May 27 that it is unilaterally ending all retaliatory duties on EU exports imposed in a beef market access dispute roughly 14 months earlier.

 

The US Obama administration had agreed to suspend the duties, after reaching an interim bilateral settlement of the underlying dispute.

 

In a Federal Register notice published on May 27, the Office of the US Trade Representative announced that it was terminating the duties on US$37.8 million of EU exports, and that it will not take steps to impose a new retaliation list at this time, despite authorisation from the World Trade Organization to do so.

 

The announcement was a response to an appeals court ruling issued in October 2010, which found that the US had failed to meet the requirements in US law to keep the sanctions in place after July 2007. Ending all retaliation is a broad application of the court's ruling, which was narrowly focused on the case of Gilda Industries, an importer of toasted breads. The ruling granted Gilda a refund for the duties it had paid after July 2007.

 

The USTR decision to refrain from imposing a new retaliation list under Section 301 reflects the fact that the US-EU Memorandum of Understanding (MOU) that increased access for US beef raised without artificial growth hormones to 20,000 tonnes annually is working successfully, according to the notice. This increase constituted the first phase of the MOU, under which the US scaled back its retaliation list from US$116.8 million to US$37.8 million, partially in response to the court ruling.

 

Refraining from imposing new retaliatory duties is also meant to encourage continued cooperation with the EU as the MOU enters its second phase in August 2012, the notice said. In that second phase, the EU would provide annual access for 45,000 tonnes of such US beef and the US would suspend its sanctions.

 

An EU official said in March that the EU remains committed to the MOU and that an early termination of the retaliatory duties would not have a negative consequence on its willingness to adhere to the deal. On the contrary, the official said an early end to the duties would be a "welcome" sign that would increase the likelihood that the EU would move to the second phase in August 2012 by expanding its annual quota to 45,000 tonnes of US beef.

 

In the US government's view, the ability of the US to fill that quota is dependent on the EU allowing the use of lactic acid as an antimicrobial wash for beef.

 

The European Food Safety Authority next month will issue its assessment on the safety of such lactic acid washes for processed beef, after which the EU could begin its process of seeking approval for the use of such washes.

 

The European Commission would have to submit a formal regulatory proposal to allow these washes, which would be subject to approval by a standing committee of member state food safety experts and scrutiny by the council of ministers and European Parliament.

 

The USTR emphasizes in the notice that it is continuing to "monitor the EU implementation of the MOU and other developments," an apparent reference to the antimicrobial wash issue. If these do not "proceed as contemplated, the Trade Representative will consider additional actions under Section 301 of the Trade Act," the notice said.

 

To impose a new retaliation list, USTR would have to launch a public notice and comment process under Section 301.

 

Upon publication of the FR notice, the US will terminate retaliatory duties for EU products on the retaliation list entering on or after May 27, as well as any unliquidated entries of products that entered after July 29, 2007, or products that entered after that date and where the final duties have not yet been assessed.

 

The Court of International Trade and a federal appeals court found that the USTR's legal authority to impose the sanctions ended on July 29, 2007, by operation of law because the USTR failed to obtain a written request within the last 60 days of a four-year retaliation period from the US beef industry to continue the duties.

 

The underlying dispute arose from the EU ban on beef raised with artificial growth hormones, which the WTO ruled was a violation of its Agreement on the Application of Sanitary and Phytosanitary Measures.