Notice of initiation of an examination procedure concerning obstacles to trade within the meaning of Council Regulation (EC) No 3286/94, consisting of trade practices maintained by Brazil in relation to imports of retreaded tyres

(2004/C 3/02)

On 5 November 2003, the Commission received a complaint pursuant to Article 4 of Council Regulation (EC) No 3286/94(1) (hereinafter "the Regulation").

1. COMPLAINANT

The complaint was lodged by BIPAVER (Bureau International Permanent des Associations de Vendeurs et Rechapeurs de Pneumatiques). BIPAVER is an international trade association representing the interests of manufacturers of retreaded tyres within the EU. It is made up of national associations from Denmark, Finland, Italy, Portugal, Spain, Sweden and the United Kingdom, whose members are manufacturers of retreaded tyres operating in the Members States. BIPAVER lodged the complaint on behalf of several Community retread manufacturers who wish to export retreaded tyres to Brazil.

BIPAVER is an association acting on behalf of Community enterprises (retread manufacturers) within the meaning of Articles 4(1) and 2(6) of the Regulation.

2. PRODUCT

The products concerned are retreaded tyres which are classified in the Combined Nomenclature (CN) under the codes 4012 11, 4012 12, 4012 13 and 4012 19.

The examination which the Commission is initiating may also cover other products which appear to be affected in a similar way to retreaded tyres. These are in particular products in respect of which interested parties that make themselves known within the time limits mentioned below (see Section 8) provide evidence that the alleged practices are applicable.

3. SUBJECT

The complaint concerns a trade barrier allegedly caused by Brazil, which adversely affects Community exports of the products in question to the Brazilian market.

The challenged Brazilian practice is based on Portaria No 8 of 25 September 2000 of the Brazilian Ministry of Development, Industry and International Commerce. According to the complainant, this act bans the importation of retreaded tyres by prohibiting the issuance of import licences for retreaded tyres imported as consumer goods or raw material. Further, Presidential Decree No 3919 of 14 September 2001 subjects the importation, as well as the marketing, transportation, storage, keeping or keeping in deposit of retreaded imported tyres to a fine of BRL 400 (around EUR 120) per unit.

4. ALLEGATION OF OBSTACLES TO TRADE

The complainant claims that the abovementioned trade measures maintained by Brazil discriminate between imported and domestic like products and that they are in breach of Brazil's obligation under the WTO Agreement, namely Articles III and XI of GATT 1994. The complainant considers as unfounded the Brazilian claims that the measures are justified by reasons of environmental or health protection.

The complainant asserts that the abovementioned penalties do not apply to domestically retreaded tyres, nor is the production of retreaded tyres prohibited in Brazil. Portaria No 133, enacted on 27 September 2001, in fact regulates the production and marketing of retreaded tyres in Brazil, with an exemption for retreaded tyres produced domestically before 1 January 2004. According to the complainant, Portaria No 133 is very similar to UNECE Regulations 108 and 109, two international standards for retreaded tyres. A Mercosur panel established at the request of Uruguay found that the Brazilian measures were incompatible with Mercosur law. In response, Brazil eliminated the ban for retreaded tyres imported from other Mercosur countries by means of Portaria No 2 of 8 March 2002. Presidential Decree No 4592 of 11 February 2003 exempts retreaded tyres imported from other Mercosur countries from the abovementioned financial penalties.

It appears that the Brazilian trade practices could be incompatible with Articles I.1, III.4 and XI.1 of GATT 1994, without being justified under Article XX, and with Articles 2.1, 2.2 and 2.4 of the TBT Agreement. There thus appears to be sufficient prima facie evidence of an obstacle to trade within the meaning of Article 2(1) of the Regulation.

5. ALLEGATION OF ADVERSE TRADE EFFECTS

The complainant claims that the challenged Brazilian trade measures have resulted in a significant drop of Community exports. The complainant asserts that, until the introduction of the ban, Community exports amounted to roughly two million units per year and were expected to increase to three million. Community exporters had an estimated share of 25 % of the Brazilian car replacement market prior to the introduction of the ban. The loss of this market share and of the two million sales as a result of the ban accounts for a significant portion of the reduction in overall Community production. Most affected are producers in the United Kingdom, Italy and Spain, who held the largest shares of exports to Brazil.

In particular, the complainant claims that the Brazilian measures have resulted in company closures and job losses. By way of illustration, the complaint refers to three companies which collapsed financially when their exports to Brazil came to a halt, with hundreds of jobs being lost. The complainant also alleges that the Brazilian ban resulted in the reduction of production, profit margins and profits as well as the surge of unit costs for those producers which managed to survive the loss of their exports to Brazil.

The complainant finally stresses the protection which the import ban accords to Brazilian producers of retreaded and new tyres and the threat of further job losses within the Community industry of retreaded tyres.

Under such circumstances, there appears to be prima facie evidence of adverse trade effects as defined in Article 2(4) of the Regulation.

6. COMMUNITY INTEREST

The Community has a general interest in maintaining the observance of international trade rules among its trading partners. This is particularly true of the obligations contained in the WTO Agreement, given the amount of trade governed by and the number of countries subject to these rules. This interest applies especially in relation to a large economy and important trading partner such as Brazil. Also, the WTO obligations at issue in the present case are among the core principles of the WTO. The Community would send a wrong signal if it did not investigate into the kind of discrimination alleged in this case, which seems to benefit domestic and Mercosur products.

Further, the alleged adverse trade effects seem to have a considerable impact on those Community producers of retreaded tyres who used to export to Brazil. The economic consequences include the loss of production and employment. The Brazilian export market was very important for the Community industry and would have a considerable growth potential in the absence of the alleged obstacle to trade. It therefore appears essential to safeguard the equal treatment of retreaded tyres from the Community on the Brazilian market by addressing the alleged obstacles to trade.

In view of the above, it is considered to be in the Community's interest to initiate an examination procedure, in accordance with Article 8(1) of the Regulation.

7. PROCEDURE

Having decided, after due consultation of the Advisory Committee established by the Regulation, that there is sufficient evidence to justify initiating an examination procedure for the purpose of considering the legal and factual issues involved, and that this is in the interest of the Community, the Commission has commenced an examination in accordance with Article 8 of the Regulation.

Interested parties may make themselves known and make known their views in writing on specific issues raised by the complaint, providing supporting evidence.

Furthermore, the Commission will hear the parties who so request in writing when they make themselves known, provided that they are fundamentally concerned by the result of the procedure.

This notice is published in accordance with Article 8(1)(a) of the Regulation.

8. TIME LIMIT

Any information relating to the matter and any request for a hearing should reach the Commission not later than 30 days following the date of publication of this notice and should be sent in writing to: European Commission Directorate-General for Trade Mr Ignacio Garcia Bercero,

DG Trade D/3

CHAR 9/74

Rue de la Loi/Wetstraat 200

B - 1049 Brussels Fax (32-2) 299 32 64.

(1) Council Regulation (EC) No 3286/94 of 22 December 1994 laying down Community procedures in the field of the common commercial policy in order to ensure the exercise of the Community's rights under international trade rules, in particular those established under the auspices of the World Trade Organisation (WTO) (OJ L 349, 31.12.1994, p. 71). Regulation last amended by Regulation (EC) No 356/95 (OJ L 41, 23.2.1995, p. 3).