Apr 14, 1989

U.S. AGAIN BLOCKS PANEL RULING ON SECTION 337 PROCEEDINGS.

GENEVA, APRIL 12 (BY CHAKRAVARTHI RAGHAVAN)ó The United States has for the third time blocked adoption by the GATT Council of the report and recommendations of a panel relating to use by the U.S. of section 337 of its trade and tariff act.

In a case relating to patent rights, brought by the EEC against the U.S., the GATT panel had ruled that the procedures envisaged in section 337 of the U.S. trade and tariff act against imported products for purported violation of patent rights of U.S. nationals (or enterprises) was inconsistent with U.S. obligations in GATT to accord "national treatment".

Under article III, imported products are to be providing treatment not less favourable than those provided to domestic products.

On the last two occasions that the subject has come before the GATT Council, the U.S. had argued that the panel had raised issues that went far beyond the implications of the particular case and would affect all Contracting Parties, and hence should not be adopted.

The Community in a detailed answer to the U.S. pleadings before the GATT Council has challenged the U.S. contentions, rejecting the U.S. argument as misinterpretations of the panel's findings.

A number of Council members spoke Wednesday in support of the Community's position.

These included Canada, Japan, Switzerland, Norway, India, Hong Kong, Australia, Brazil, Argentina, Austria, Korea, Pakistan, Uruguay and Yugoslavia.

The U.S. delegate however did not agree to the adoption of the report, arguing that his authorities were still examining the broad implications of the report, and that the U.S. continued to be concerned about the panel's interpretations of article III of GATT (national treatment) and article XX (general exceptions provisions).

On another pending issue before the Council, namely the EEC complaint against U.S. over the transposition of customs tariff schedules from the CCCN classification to the new Hs classification. The Council could not take any action either.

The EEC had complained that while the transposition from the CCCN to Hs system was to have been done in a "neutral" way, the U.S. had done it in such a manner as to increase the tariff on textiles imports.

The Community has asked the issue to be arbitrated by the GATT, Director-General.

The U.S. however did not agree, arguing that this was a matter that should be dealt with in the Uruguay round.

The Community was supported by Hong Kong and Australia.

The Community said that in view of the U.S. position, it would have to look at other options open to it, and would notify the GATT of its conclusions.

Another issue that came before the Council was the implementation of the panel report in a dispute involving the U.S. and Canada where the panel has ruled against Canada over its export restrictions on salmon and herring fish caught in its waters.

Recently, the U.S. has published in its federal register a number of possible Canadian products an which the U.S. would withdraw tariff concessions as a compensation for the benefits lost by the U.S. due to the Canadian actions and failure to implement the panel ruling.

When Canada brought this to the notice of the Council, the U.S. claimed that it had taken no action, but that the U.S. Administration could not remain quiet when Canadian actions were inconsistent with GATT and U.S. trade interests were being affected.

Canada however pointed out that any retaliatory actions could be taken only when authorised by the GATT Contracting Parties. Canada was still trying to implement the panelís ruling, the Canadian delegate reportedly.

In comments on this case, both Japan and the EEC "encouraged" Canada to implement the report but warned the U.S. against unilateral measures of retaliation (by the U.S.) without the authority of the GATT.

In relation to the U.S. super-fund levy, where a tax is levied on imported petroleum and products at rates higher than on domestic petroleum and products, and which has been held to be illegal in GATT. Canada expressed its concern about the non-implementation of the panel ruling by the United States.

The U.S., Canada pointed out has had two years to implement the ruling and remove the discriminatory tax but had not done so.

Canada announced that it was preparing a request to the GATT, under article XXIII (2) for authorisation to withdraw equivalent concessions from the U.S.

The EEC has already put in such a request.

Mexico and Nigeria were among the countries that also expressed their concern, reiterating their preferred option of the implementation of the panel's ruling by the United States.

The U.S. regretted Canadian announcement of intention to seek authorisation for retaliation.

The administration, the U.S. delegate reportedly said, was sending to Congress proposals for removing the discrimination. If the Congress would not adopt it, the Administration would seek negotiations to provide compensation.

Under any other business, Chile raised the recent problems caused to its exports of grapes and other fruits.

The Chilean delegate recounted the grave economic problems caused to his country when grapes exporter by Chile were impounded in U.S. and some other countries because of two grains of grapes having been found contaminated with toxic substances through an act of sabotage aimed at damaging Chilean exports.

Giving notice of his intention to bring the issue before the next Council meeting, the Chilean delegate said it was necessary to consider both the rights of Contracting Parties to defend the health of their populations and at the same to ensure a stable climate for trade and exports.

GATT, he said, should be in a position to deal with such attempts at economic sabotage, which he said was "economic terrorism".

Chile would propose a new GATT mechanism to cope with such emergencies, and that could act very quickly in order not to prejudice the commercial interests of the Contracting parties affected.