Proposal for a Council Regulation suspending and conditionally repealing Regulation (EC) No 2193/2003 establishing additional customs duties on imports of certain products originating in the United States of America
Date: 2006-05-12
Institutions: European Commission
Subjects: United States, additional duty, customs duties, import, originating product, suspension of customs duties

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 12.5.2006 
COM(2006) 229 final 

2006/0072 (ACC) 

Proposal for a 

COUNCIL REGULATION 

suspending and conditionally repealing Regulation (EC) No 2193/2003 establishing 
additional customs duties on imports of certain products originating in the United States 
of America 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

The World Trade Organization (WTO), in a number of rulings issued upon application of the 
European Communities (“the EC”), has found the Foreign Sales Corporation subsidy scheme 
of  the  United  States  of  America  (“the  US”),  as  such  and  as  amended  by  the  Foreign  Sales 
Corporation and Extraterritorial Income (FSC-ETI) legislation to provide a prohibited export 
tax subsidy to US firms to the tune of roughly US $ 4 billion per year (as of year 2000).  

Following those rulings, on 7 May 2003 the EC was granted by the WTO the right to impose 
countermeasures,  in  the  form  of  additional  import  tariffs  of  up  to  100%  ad  valorem  on 
imports  of  certain  goods  from  the  United  States  (selected  after  consultation  of  the  public, 
Member  States  and  the  Commission  services),  up  to  the  amount  of  the  US  illegal  subsidy. 
Consequently, on 8 December 2003 the EC adopted Council Regulation (EC) No 2193/2003 
establishing additional customs duties on imports of certain products originating in the United 
States of America1. 

Council Regulation (EC) No 2193/2003 provides for the repeal of the countermeasures upon 
the  United  States’  full  implementation  of  the  recommendation  of  the  WTO  Dispute 
Settlement Body2. 

Legislation  foreseeing  the  repeal  of  the  FSC-ETI  legislation  was  adopted  by  the  US  on  22 
October 2004 (The American JOBS Creation Act of 2004 – “the repeal Act”). The repeal of 
the  FSC  subsidy  scheme  represented  a  major  and  welcome  step  towards  solving  a  long 
standing dispute. 

The  US  repeal  Act,  however,  included  transitional  and  grandfathering  provisions  which 
appeared  to  be  WTO  incompatible.  In  particular,  the  repeal  Act  provided  that  FSC/ETI 
benefits would remain available to US exporters up to the end of 2006 (at the level of 80% 
and  60%  for  2005  and  2006  respectively),  and  in  some  cases  for  an  unlimited  period 
thereafter under the grandfathering provisions. Consequently, the EC initiated a WTO dispute 
settlement  procedure  regarding  the  repeal  Act  to  determine  the  WTO  compatibility  of  the 
transitional and grandfathering provisions contained therein.  

Pending  the  dispute  settlement  procedures,  the  application  of  EC  countermeasures  were 
suspended (despite the US refusal to do the same in respect of its retaliation against the EC on 
hormone  beef).  The  suspension  was  operationalised  by  the  adoption  of  Council  Regulation 
(EC) No 171/2005 of 31 January 2005. The Regulation stipulates that countermeasures would 
only  be  reapplied  on  1  January  2006  or  60  days  after  the  WTO  Dispute  Settlement  Body 
(DSB)  (whichever  date  is  later)  had  confirmed  the  WTO  incompatibility  of  the  challenged 
aspects of the US legislation. The Regulation further stipulates that countermeasures will be 
introduced at the level of a 14 % ad valorem duty.  

On 14 March 2006, following the panel and Appellate Body rulings in favour of the EC, the 
DSB confirmed the WTO incompatibility of the challenged US legislation and (as calculated 
under  the  applicable  EC  Regulation)  the  60-day  period  means  the  reintroduction  of 
countermeasures on 16 May 2006. This, in accordance with Article 2.2 of Council Regulation 
(EC) No 171/2005 was announced by Commission Notice 2006/C/08 which appeared in the 

1 OJ No. L 328, 17.12.2003, p. 3. 
2 Article 3 of Council Regulation No. 2193/2003. 

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Official Journal (Section C) on 3 May 2006 as the US had yet to comply with the rulings and 
recommendations of the DSB. 

On 11 May 2006, the US Congress adopted a Bill repealing the grandfathering provisions of 
the FSC/ETI legislation and the repeal Act for the next taxable years. As the transition rules of 
that  legislation  expire  in  2006,  it  is  appropriate  to  repeal  Council  Regulation  (EC)  No 
2193/2003  as  amended  by  Council  Regulation  (EC)  No  171/2005,  as  the  countermeasures 
introduced  by  that  Regulation  have  achieved  their  objective  to  a  sufficient  extent  and 
reintroduction of countermeasures would be unnecessarily disruptive. 

It  is,  therefore,  proposed  to  repeal  Council  Regulation  (EC)  No  2193/2003  as  amended  by 
Council  Regulation  (EC)  No  171/2005.  Since  the  President  of  the  United States  has  to  sign 
the Bill into law, the reintroduction of sanctions should continue to be suspended until such 
signature  has  taken  place,  and  the  repeal  of  countermeasures  imposed  under  Council 
Regulation (EC) No 2193/2003 as amended by Council Regulation (EC) No 171/2005 should 
only become effective once this signature has taken place. 

Repeal  of  the  countermeasures  requires  action  by  the  Council  under  Article  133  of  the  EC 
Treaty.  A  new  Council  Regulation,  suspending  and  conditionally  repealing  Council 
Regulation (EC) No 2193/2003 as amended by Council Regulation (EC) No 171/2005 needs 
to be adopted following a proposal from the Commission. 

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2006/0072 (ACC) 

Proposal for a 

COUNCIL REGULATION 

suspending and conditionally repealing Regulation (EC) No 2193/2003 establishing 
additional customs duties on imports of certain products originating in the United States 
of America 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular Article 
133 thereof, 

Having regard to the proposal from the Commission3, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

On  7  May  2003,  the  Community  was  authorised  by  the  Dispute  Settlement  Body 
(DSB)  of  the  World  Trade  Organization  (WTO)  to  impose  countermeasures  up  to  a 
level  of  USD  4,043  million  in  the  form  of  additional  100%  ad  valorem  duties  on 
certain  products  originating  in  the  United  States  of  America.  Consequently,  on  8 
December  2003  the  Community  adopted  Council  Regulation  (EC)  No  2193/2003 
establishing additional customs duties on imports of certain products originating in the 
United States of America.4 

The Community, pending the outcome of further WTO litigation regarding the WTO 
compatibility  of  the  transition  and  grandfathering  provisions  of  the  FSC  Repeal  and 
Extraterritorial Income Act of 2000 (FSC-ETI Act) and of the American Jobs Creation 
Act of 2004 (JOBS Act), amended and suspended the application of Regulation (EC) 
No 2193/2003 by the adoption of Regulation (EC) No 171/2005. 

Regulation 171/2005 stipulates that reintroduction of additional duties would only take 
effect again on 1 January 2006 or 60 days after the DSB confirms, whichever date is 
later, the incompatibility of certain aspects of the abovementioned Act with WTO law. 

On 14 March 2006 the DSB confirmed the WTO incompatibility of the challenged US 
measures following a panel and Appellate Body ruling on the matter. The Commission 
on  3  May  2006  published  a  notice  informing  that  an  additional  duty  of  14  %  ad 
valorem would become applicable on 16 May 2006. 

3 
4  

OJ C , , p. . 
OJ No. L 328, 17.12.2003, p. 3. 

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(5) 

(6) 

The US Congress has now adopted legislation repealing the grandfathering provisions 
of  the  FSC-ETI  Act  and  of  the  JOBS  Act  for  the  next  taxable  years  and  therefore 
countermeasures imposed under Council Regulation (EC) No 2193/2003 as amended 
by Council Regulation (EC) No 171/2005 have achieved their objective to a sufficient 
extent and reintroduction of countermeasures would be unnecessarily disruptive.  

Since the President of the United States has to sign the Bill into law, the reintroduction 
of sanctions should continue to be suspended until such signature has taken place, and 
the repeal of countermeasures imposed under Council Regulation (EC) No 2193/2003 
as amended by Council Regulation (EC) No 171/2005 should only become  effective 
once this signature has taken place. 

HAS ADOPTED THIS REGULATION: 

Article 1 

1. 

2. 

3. 

4. 

The suspension of the application of additional duties provided in Articles 1 and 2 of 
Council Regulation (EC) 171/2005 is hereby extended until 24 May 2006. 

In the event the President of the United States signs the Bill adopted by the Congress 
of the United States repealing the grandfathering provisions of the FSC-ETI Act and 
of the JOBS Act on or before 22 May 2006, Council Regulation (EC) No 2193/2003 
as amended by Council Regulation (EC) No 171/2005 shall be repealed with effect 
from 24 May 2006. 

After the abovementioned signature has taken place, the Commission shall promptly 
publish a notice in the Official Journal of the European Union announcing that such 
signature  has  taken  place  and  that  Council  Regulation  (EC)  No  2193/2003  is 
repealed with effect from 24 May 2006. 

In  the  event  that  no  such  signature  takes  place  by  22  May  2006,  the  Commission 
shall  promptly  publish  a  notice  in  the  Official  Journal  of  the  European  Union 
announcing  that  no  such  signature  has  taken  place  and  that  countermeasures  as 
provided  in  Council  Regulation  (EC)  No  2193/2003  as  amended  by  Council 
Regulation (EC) No 171/2005 become applicable again on 25 May 2006. 

Article 2 

This Regulation shall enter into force on the day of its publication in the Official Journal of 
the European Union.  

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels,  

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For the Council 
The President 

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