No. 55/08
May 28, 2008

EU REJECTS US CLAIMS OVER TECHNOLOGY TARIFFS

The European Commission strongly rejects US claims made today that the EU is not fulfilling its obligations under the 1996 Information Technology Agreement (ITA). And there is no foundation to the US claim that the customs classification applied by the EU to certain technological goods is not justified under the ITA. The EU has respected its ITA obligations and has explicitly said it is willing to reassess the current ITA product coverage to reflect new technology in a negotiation with all ITA signatories. However, the US refuses to do this even though the ITA is not a bilateral agreement and changes to its criteria cannot be made as a result of bilateral litigation. 

• The EU has always expressed its willingness to reassess product coverage under the ITA to reflect changes in technology since 1996. The ITA has a review clause, which can be invoked by members at any time. The EU has said it is willing to negotiate with all other ITA members. The US is not willing to do this. Why not?
• The EU believes that the solution to addressing new technologies that have emerged from the base technologies of 1996 is not to relax existing objective customs classifications. Litigation will not change the ITA either. The ITA is not a bilateral EU-US agreement and a change in ITA criteria can only be made on the basis of the consensus of all ITA participants.
• The EU, as required by WTO law, bases its customs classification exclusively on the objective characteristics of the products. Where changes in technology have given a product multiple functions – for example, a digital photo camera that also records large amounts of high-quality video - then these products in many cases are objectively different products falling outside of the original product categories covered by the ITA and are classified as such by the EU and others. The US claims this is a violation of the ITA. But both the spirit and explicit provisions in the ITA make it clear that extension to new products to reflect technological change would not be automatic, but based on periodic review by signatories.
• The only way to adapt the ITA to changed technologies is to renegotiate the product scope of the ITA with all its signatories, as the ITA foresees. Such a renegotiation would also allow addressing other problems encountered in trade of IT products, the non-tariff barriers and the geographical coverage of the ITA. The ITA does not include at present important new players such as Mexico, Brazil, Chile or South Africa, which benefits from the ITA without being bound by it. The EU has proposed such a negotiation, but the US has not followed up on such offer. 

The US complaint identifies three products: 

Is it a LCD monitor or a flat screen TV? The ITA gives duty-free treatment to computer monitors, not to monitors for consumer electronics such as TV or DVD players. What the US claims are LCD computer monitors are in fact screens equipped with a Digital Visual Interface to allow use with consumer electronics such as DVD players. They are therefore properly classified as video monitors and not covered by the ITA. Incidentally, the classification of such products by US customs is similar to EU practice.

Is it a set top box or a video recorder? The ITA only covers set-top boxes which offer access to the internet and can perform interactive information exchange. Set-top boxes which include a hard disk for the purpose of pausing live TV or recording but do not have the required interactive or internet functions are properly classified as video recorders and thus fall outside the scope of the ITA. The EU has recently revised the classification of so-called "walled-garden" set-top boxes as ITA products on consideration that they offer some access to the Internet, even if it is actually very limited.

Is a Multifunctional Digital Copier an ITA product? The US has changed its mind. At the time of the negotiation of the ITA, the EU requested that all photocopiers be covered. The US opposed this and as a result, two types of copiers were not covered. These included those that use the indirect method of scanning a document and then printing it on paper (i.e. using an "indirect" electrostatic print engine). This is the case for most multifunctional copiers, which are therefore properly classified outside of the ITA coverage. The EU's classification has been confirmed by the European Court of Justice in two cases. Now, however, the US appears to have changed its mind. Strangely, it does not want to seek changes through the ITA's agreed review mechanism. 

Background

The Information Technology Agreement was negotiated and signed in 1996, with the goal of expanding trade in IT and telecommunication products by eliminating tariffs on an agreed range of such products. The 29 countries that originally negotiated the accord has now grown to a total of 71 signatories. They have agreed to eliminate customs duties and other duties and charges on certain IT products.  

Further Contact Information:
Press and Public Diplomacy
Delegation of the European Commission
2300 M Street, NW
Washington, DC 20037
Tel: 202-862-9552