Indonesia, USA: Deadline Nears for US Clove Cigarette Action

Source from:  Jakarta Post (id)  06/28/2013

The United States is expected to respond soon to a ruling by the World Trade Organization (WTO) in April last year that said the Tobacco Control Act of 2009 was discriminatory.

The trade organization's appellate body ruled that the act issued by US Food and Drug Administration (FDA) was discriminatory because that it bans the sale of clove cigarettes while allowing trade of the menthol counterpart.

The WTO ordered the US to revise the act within 15 months of the ruling, meaning that the deadline for the revision will be in July.

A revision to the act could reopen the door to Indonesia's clove cigarettes, which used to account for 99 percent of total clove cigarettes sold in the US. Annual shipment was estimated to worth around US$200 million.

Deputy Trade Minister Bayu Krisnamurthi said on Wednesday so far there was no indication the US would revise the act in accordance with the WTO ruling.

"We are assessing measures that can be taken when the US does not comply with the ruling by the deadline," Bayu told The Jakarta Post in a text message.

Among those measures are compensation and retaliation.

The WTO's dispute mechanism means the losing country is given "a reasonable period" to comply, normally 15 months. If it fails to take action within this period, the complaining country can apply for compensation, such as a tariff cut by the losing country equal to the value lost.

If parties cannot reach agreement on compensation, the complaining side can request permission from the Dispute Settlement Body (DSB) for trade sanctions against its counterpart, a measure known as "retaliation".

The DSB should authorize this action within 30 days of the expiry of the "reasonable period" unless there is an agreement against the request.

The Trade Ministry wrote to the US trade representative at the end of May requesting a consultation, but has received no response from the US, according to the Trade Ministry's director general for international trade cooperation, Iman Pambagyo.

"We are disappointed because the US has not officially responded to our request for a compensation consultation," said Iman.

Troy Pederson, press attaché at the US Embassy in Jakarta, said the US was still working on the recommendations of the WTO, consistent with public health.

"Under the WTO ruling, the United States has a 'reasonable period of time', until July 24," he said in an email.

Indonesia is currently involved in another trade dispute with US regarding the importation rules for live animals and vegetables, which the US considers trade-restrictive.

In January, the US lodged a request with the WTO for a consultation, claiming Indonesia had created a "complex web of import licensing requirements" that unfairly restricts US exports and protects the local agriculture industry.

On April 24, the WTO set up a panel to settle the issue, but it is yet to begin work.

Indonesia responded quickly to US complaints by revising its importation rules with simplified administrative procedures and the elimination of import allocation provision. Enditem