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					                            BRUSSELS MONITOR
               A Weekly Review of EU Trade Policy Developments Affecting Japan
                                                                                                                         19 December 2008

                               IN THIS ISSUE

  I.      WTO Watch
          WTO Appellate Body issues ruling in Chinese auto parts dispute

 II.      European Union: Trade
          Fresh ecodesign plan lists products for future new measures to minimise environmental
          harm

 III.     EC Competition
          CFI annuls Commission state aid decision on Charleroi Airport

 IV.      European Union: Regulatory
          Product supply chain focus of Commission’s reports on product safety progress

 V.  Dumping Watch
  A. Expiry of anti-dumping measures - silicon
  B. Initiation of anti-dumping proceeding – ring binder mechanisms
  C. Imposition of countervailing measures – polyethylene terephthalate
  D. Imposition of anti-dumping measures – welded tubes

  VI.     The Week Ahead
          No developments to report.




                                                                         ****
Brussels Monitor is a product of the Japan Fair Trade Center in cooperation with the international trade practice of the Belgium law firm of Van
Bael & Bellis. All questions concerning its content should be addressed to:

                                                               Van Bael & Bellis
                                                               Avenue Louise 165
                                                            B-1050 Brussels, Belgium
                                                              TEL: 32-2-647-7350
                                                              FAX: 32-2-640-6499
                                                          E-MAIL: vbb@vanbaelbellis.be

                                                                        ****




Page 1 of 9
 I.      WTO Watch

 WTO Appellate Body issues ruling in Chinese auto parts dispute

 On 15 December 2008, the WTO’s Appellate Body issued its report adjudicating complaints lodged
 by the US, the EU and Canada against China’s tariff and tax treatment of imported auto parts, which
 the three complainants had alleged to be inconsistent with WTO rules. On appeal, the Appellate Body
 has for the most part upheld the findings of the July 2008 dispute settlement panel that China
 breached its obligations under Article III of the GATT by granting imported auto parts less
 favourable treatment than like domestic parts and that, more particularly, it subjects imported auto
 parts to an internal charge that is not applied to like domestic auto parts. Importantly, the Appellate
 Body ruling is the first dispute to be litigated against China since the country’s accession to the WTO
 in December 2001.

 The dispute focused on a series of legislative measures adopted by China during 2004-2005, namely
 Policy Order 8 (“Policy on development of the automotive industry”), Decree 125 (“Administrative
 measures on importation of automotive parts deemed vehicles”) and Announcement 4 issued (“Rules
 for verifying whether imported automotive parts are deemed whole vehicles”). By virtue of these
 laws, Chinese authorities have been imposing an additional charge of 15% on top of the normal 10%
 customs duty on imported car parts where the imported parts represent 60% or more of the price
 corresponding to the complete vehicle or where specific combinations of the imported car parts are
 used to assemble the final vehicle. The total tariff of 25% ultimately imposed on the imported parts is
 actually equivalent to the tariff typically imposed on imported complete vehicles. The Appellate
 Body has now clearly established that this tariff and tax policy from the Chinese side is inconsistent
 with WTO rules.

 The Appellate Body also concluded that the panel erred in construing the Chinese measures at issue
 as imposing a charge on completely knocked down (CKD) and semi-knocked down (SKD) kits
 imported under the Decree 125, and has consequently reversed the panel’s finding that, with respect
 to their treatment of imports of CKD and SKD kits, the disputed measures are inconsistent with the
 specific commitment set out in paragraph 93 of China’s Accession Working Party Report. In simple
 terms, the Appellate Body has found that China has not violated its commitments under the said
 special rule by creating separate tariff lines on the kits in question, since automobile manufacturers
 had still the “option to declare imports of CKD and SKD kits upon importation” and remove
 themselves from the charge.

 The US and the EU have welcomed the verdict of the Appellate Body. US Trade Representative
 Susan Schwab said in a statement following the issuance of the ruling that “the WTO Appellate Body
 confirmed that China’s discriminatory taxation of US auto parts is fundamentally at odds with core
 WTO principles”. For her part, EU’s Trade Commissioner Catherine Ashton stated that “China
 should put an end to the discrimination and ensure a level playing field in its automobile sector”.
 Both the EU and the US have criticised China of manipulating its legislation in order to put
 significant pressure on foreign automobile manufacturers to relocate their manufacturing facilities in
 China.




Page 2 of 9
 II.    European Union: Trade

 Fresh ecodesign plan lists products for future new measures to minimise environmental harm

 A new Commission working plan has been published to expand the list of energy-using products that
 will fall subject to implementing measures under the EU’s Ecodesign Directive (2005/32/EC). The
 working plan notes that the environmental priorities for the adoption of implementing measures
 (which will go to the very core of how products are designed if they are to be sold in Europe) remain,
 as before, “to harness the potential of energy-using products to combat climate change in a cost-
 effective manner.” Businesses will need to brace themselves as any measures that are introduced to
 combat climate change come at a cost.

 The Commission’s working plan is dated 21 October 2008, and spans the period 2009 to 2011. It
 reiterates the objectives of the legislation, namely, to improve the environmental performance of
 products throughout their lifecycle. The main stages of the lifecycle of typical products are: raw
 material selection and use, manufacturing, packaging, transport and distribution, installation and
 maintenance, actual use, and end-of-life.

 Electrical appliance suppliers will recall that draft implementing measures have already been drawn
 up for some earlier products groups, including for standby and off-mode power consumption of
 electrical and electronic household and office equipment, external power supplies, lighting equipment
 for public street and office lighting, and simple set-top boxes for televisions. In 2009, the
 Commission intends to submit implementing measures on, among others, televisions, domestic
 lighting, domestic refrigerators and freezers, washing machines, dishwashers, computers and imaging
 equipment.

 The latest working plan sets out a new indicative list of energy-using product groups which will be
 considered priorities for the adoption of final implementing measures for each such group, from 2009
 to 2011. The list comprises the following:

 •     air-conditioning and ventilation systems;
 •     electric and fossil-fuelled heating equipment;
 •     food-preparing equipment;
 •     industry and laboratory furnaces and ovens;
 •     machine tools;
 •     network, data processing and data storing equipment;
 •     refrigeration and freezing equipment;
 •     sound and imaging equipment (such as video projectors and certain types of camera);
 •     transformers; and
 •     water-using equipment.

 Inclusion of a product group on the indicative list means that during the upcoming three year period
 the Commission will initiate a preparatory study on such groups, and possibly adopt an implementing
 measure. Each preparatory study will investigate possible ecodesign requirements; at the same time,
 the relevant industry sectors are encouraged to develop self-regulation measures which could deliver
 the environmental policy objectives more speedily than mandatory requirements, and, it is hoped, in a
 more cost-effective manner.




Page 3 of 9
 The ecodesign Directive, adopted in 2005, is a framework Directive, paving the way for
 environmentally-friendly design requirements that will be binding on all the relevant industry sectors
 via implementing measures. As the first set of implementing measures are scheduled for adoption by
 the Commission towards the end of this year or first quarter of 2009, businesses should check if their
 products could possibly be covered. If the answer is yes, they should aim to acquaint themselves as
 soon as possible with the implementing measures’ provisions.

 The working plan for 2009-2011, which includes a timeframe for upcoming implementing measures
 (see: Annex II) can be accessed at:
 http://ec.europa.eu/energy/demand/legislation/doc/working_plan/2008_10_21_working_plan_en.pdf.

 III.     EC Competition

 CFI annuls Commission state aid decision on Charleroi Airport

 On 17 December 2008, the European Court of First Instance (CFI) annulled a Commission decision
 finding that the advantages granted by Belgium’s Walloon Region and Brussels South Charleroi
 Airport (BSCA) to Irish low-budget carrier Ryanair constituted illegal state aid. The CFI found, in
 essence, that the Commission had erred by refusing to consider the Walloon Region (the owner of
 Charleroi Airport) and BSCA (a public sector company controlled by the Walloon Region operating
 as a concession holder at Charleroi Airport) to be a single legal entity and by failing to apply the so-
 called “private market investor” principle in its assessment of the compatibility of the measures.

 Ryanair initiated the present case before the CFI when it appealed against a February 2004
 Commission decision finding that state aid paid to Ryanair by the publicly-owned airport in Charleroi,
 Belgium was illegal. Ryanair asked the CFI to find that, when the regional authority that owned the
 Charleroi Airport granted subsidies to Ryanair, it was doing so not as a public entity, but as a market
 participant. The Commission, in contrast, argued that the authority could not be considered a market
 participant, as the subsidies given to Ryanair offered no rational expectation of a corresponding profit
 in the long term.

 The CFI found that the Commission was wrong in its refusal to consider the authority to be a market
 participant and to apply the private investor principle to the measures adopted by the Walloon Region.
 The CFI found that, firstly, the Commission had erred by treating the Walloon Region and BSCA as
 separate entities in its assessment of the aid measures, since legal and financial links existed between
 the two. Secondly, the CFI did not accept the Commission’s arguments that the fixing of landing
 charges by the Walloon Region fell within its legislative and regulatory competence and therefore did
 not constitute an economic activity. The CFI held that such an activity was directly connected with
 the management of airport infrastructure, which itself clearly constitutes an economic activity. In
 addition, the airport charges fixed by the Walloon Region must be seen as consideration for services
 rendered at Charleroi Airport. Consequently, the CFI stated that the provision of airport facilities by a
 public authority to airlines in return for payment of a fee, the amount of which is freely fixed by that
 authority, can be described as an economic activity. The CFI further ruled that the mere fact that the
 Walloon Region has regulatory powers in relation to fixing airport charges does not mean that a
 scheme reducing those charges should not be examined by reference to the private investor principle.

 In conclusion, the CFI held that the Commission had erred in law by failing to examine together the
 advantages granted by the Walloon Region and by BSCA and by failing to apply the private investor




Page 4 of 9
 principle to the measures adopted by the Walloon Region despite the economic links binding those
 two entities. Consequently, the CFI annulled the Commission decision.

 IV.     European Union: Regulatory

 Product supply chain focus of Commission’s reports on product safety progress

 As is already known, faulty toys imported into the EU from China led to a landslide of recalls in the
 summer of 2007. The Commission has been working on improving the product supply chain since
 then, and has recently reported on measures taken to improve the EU’s product safety system in 2008
 and those projected for 2009. These changes to the product supply chain will impact on the product
 chain from manufacture in China, through import into and sale in the EU.

 Measures which have been taken by the Commission to improve the EU’s product safety system have
 included the Commission’s adoption of a proposal to revise the toy safety Directive (88/378/EEC).
 The revision of this Directive aims to include new and higher safety requirements to cope with
 identified hazards, to strengthen manufacturers’ and importers’ responsibility for the marketing of
 toys and to enhance market surveillance and customs controls by the Member States.

 Another measure taken to improve product safety was the adoption of Decision 2008/329/EC in April
 2008, which required Member States to ensure that, from 21 July 2008, magnetic toys placed on the
 EU market must carry warning labels. This Decision relates to all magnetic toys: toys that contain or
 consist of loose or detachable magnets, or magnetic components of such size and shape that they can
 be swallowed by children. Magnets have been identified as an emerging risk, as smaller, more
 powerful and more easily detachable magnets are now being included in toys.

 Furthermore, March 2008 saw the full application of Commission Decision 2006/502/EC which
 banned the sale of non-child-resistant and novelty lighters to consumers. The Decision provided that
 from 11 March 2008, cigarette lighters placed on the EU market must be child resistant (with the
 exception of lighters which are sold with a two-year written guarantee, are refillable and can be
 repaired by a European-based after-sales service organisation) and that novelty lighters can no longer
 be placed on the market.

 Thereafter, on 9 July 2008, Regulation 765/2008/EC and Decision 768/2008/EC were adopted,
 setting out a new legislative framework for the marketing of products. The package modernises the
 conditions for placing a wide range of industrial products on the EU market and lays down horizontal
 provisions on market surveillance and controls of products entering into the EU.

 Finally, on 7 November 2008 Member States published the reference of the European babywalker
 Standard in the Official Journal, thereby turning it into a harmonised standard with specified
 production and compliance checks.

 The Commission was also keen to stress the non-legislative actions it has taken, with self-regulatory
 measures being preferred, wherever possible. Non-legislative developments include funding of €2.6
 million provided to four cross-border market surveillance actions by the Member States. The so-
 called Joint Actions which were funded included research on toys for children under three years,
 cords and drawstrings on children’s clothing (looking at the strangulation risk of such products) and
 the second stage of the Enhancing Market Surveillance through Best Practice project (EMARS2).




Page 5 of 9
 Action taken by the Commission in relation to industry over 2008 has focussed on the toys sector,
 with the Consumer Commissioner, Meglena Kuneva agreeing with the European toy industry on a
 voluntary agreement, in which the industry engaged to spread best safety practices. The Commission
 is currently working on an agreement with toy importers and retailers to engage them in measures to
 improve the safety of toys on the European market.

 In June 2008, the Commission presented a report entitled “Evaluating Business Safety Measures in
 the Toy Supply Chain” which sets out the results of a five-month analysis of product safety measures
 in the toy supply chain. The conclusion of the research was that product safety has to be considered
 throughout the entire product supply chain. Amongst the key conclusions, the report found that it is
 the smaller players in the market that tend to be the weak link in the product safety chain. A second
 area where weaknesses have been detected is in relation to the expertise available within Member
 States’ enforcement practices and the role of testing laboratories.

 The Commission finally set out its proposed actions for 2009, stating that it is due to propose
 mandates for drafting standards for children’s products (other than toys) for which there are currently
 no standards. An example is for the proposal of new standards for products used for sleeping or in
 association with the cot or the crib, such as cot-bumpers and sleeping bags. Standards will also be
 proposed for bathing products, such as bath rings, bath aids and also products combining a changing
 mat with a bath. Finally, the Commission is to request the revision of existing standards to cover new
 risks that are not currently being addressed (e.g., high-chairs).

 V.      Dumping Watch

  A.     Expiry of anti-dumping measures - silicon

 On 16 December 2008, the Official Journal published a notice of the expiry of certain anti-dumping
 measures.

 The product concerned is silicon, currently classifiable within CN code 2804 69 00 (silicon content
 less than 99.99% by weight).

 It is recalled that the measures currently in force are anti-dumping measures on imports of the
 product concerned from Russia imposed by Regulation 2229/2003 as last amended by Regulation
 821/2004. Price undertaking of a Russian silicon producer was accepted by Commission Decision
 2004/445/EC.

 The Commission noted that further to the publication of a notice of impending expiry, following
 which no request for a review was lodged, the measures will expire on 25 December 2008.

  B.     Initiation of anti-dumping proceeding – ring binder mechanisms

 On 17 December 2008, the Official Journal published a notice of initiation of an anti-dumping
 proceeding concerning imports of certain ring binder mechanisms originating in Thailand.

 The product allegedly being dumped is certain ring binder mechanisms originating in Thailand,
 currently classifiable within CN code ex 8305 10 00. Ring binder mechanisms shall consist of two
 steel sheets or wires with at least four half-rings made of steel wire fixed on them and which are kept




Page 6 of 9
 together by a steel cover. They can be opened either by pulling the half rings or with a small steel
 trigger mechanism fixed to the ring binder mechanism.

 The complaint was lodged on 11 November 2008 by Community producer Ring Alliance
 Ringbuchtechnik GmbH representing a major proportion, in this case more than 50%, of the total
 Community production of certain ring binder mechanisms.

 All interested parties, if their representations are to be taken into account during the investigation,
 must make themselves known by contacting the Commission, present their views and submit
 questionnaire replies or any other information within 40 days of the date of publication of the notice
 in the Official Journal. All interested parties may also apply to be heard by the Commission within
 the same 40-day time limit.

 The investigation will be concluded within 15 months of the date of the publication of the notice in
 the Official Journal. Provisional measures may be imposed no later than 9 months from the
 publication of the notice in the Official Journal.

  C.     Imposition of countervailing measures – polyethylene terephthalate

 On 19 December 2008, the Official Journal published Regulation 1286/2008 amending Regulation
 193/2007, imposing a definitive countervailing duty on imports of certain polyethylene terephthalate,
 originating in India and amending Regulation 192/2007 imposing a definitive anti-dumping duty on
 imports of certain polyethylene terephthalate, originating in, inter alia, India.

 The product concerned is polyethylene terephthalate (PET) with a viscosity number of 78 ml/g or
 higher, according to ISO Standard 1628-5. It is currently classifiable within CN code 3907 60 20.

 It is recalled that on 30 November 2000, by Regulation 2603/2000, the Council imposed definitive
 countervailing duties on imports of certain PET originating in, inter alia, India. Following an expiry
 review, the Council, by Regulation 193/2007, imposed a definitive countervailing duty on imports of
 certain PET, originating in India for a further period of five years. The rate of the fixed duty ranges
 between 0 and 106.5 EUR/tonne for individually named exporters with a residual duty rate of 41.3
 EUR/tonne imposed on imports from other exporters. Furthermore, by Regulation 192/2007, the
 Council imposed a definitive anti-dumping duty on the same product originating in India. Under this
 Regulation the rate of the fixed duty ranges between 88.9 and 200.9 EUR/tonne for individually
 named exporters with a residual duty rate of 181.7 EUR/tonne imposed on imports from other
 exporters.

 Following the imposition of the definitive countervailing duty, the Government of India submitted
 that the circumstances with regard to two subsidy schemes have changed and that these changes are
 of a lasting nature. Consequently, it was argued that the level of subsidisation was likely to have
 decreased and thus measures that had been established partly on these schemes should be revised.
 The Commission examined the evidence submitted by India and considered it sufficient to justify the
 initiation of a review, limited to the level subsidisation. Therefore, an ex officio partial interim review
 was initiated.

 The Commission investigated seven schemes, which allegedly involved the granting of subsidies. It
 was found that the cooperating exporting producer did not receive a subsidy from certain schemes.
 On the other hand, it was found that three schemes (namely the Advanced Authorisation Scheme, the



Page 7 of 9
 Export Promotion Capital Good Scheme and the Target Plus Scheme) constituted a countervailable
 subsidy. Following the investigation, the countervailing duty rates were newly calculated. The new
 rates vary from 0 to 106.5 EUR/tonne.

 The amendment of the countervailing duty rate had also an impact on the definitive anti-dumping
 duty imposed on producers in India. Therefore, the new subsidy levels had to be taken into account
 for the purpose of adjusting the dumping margins, previously established. The new rates of anti-
 dumping duties vary from 87.5 to 200.9EUR/tonne.

 Regulation 1286/2008 entered into force on 20 December 2008.

 D.      Imposition of anti-dumping measures – welded tubes

 On 19 December 2008, the Official Journal published Regulation 1256/2008 imposing a definitive
 anti-dumping duty on imports of certain welded tubes and pipes of iron or non-alloy steel originating
 in Belarus, the People's Republic of China and Russia following a proceeding pursuant to Article 5 of
 Regulation 384/96, originating in Thailand following an expiry review pursuant to Article 11(2) of
 the same Regulation, originating in Ukraine following an expiry review pursuant to Article 11(2) and
 an interim review pursuant to Article 11(3) of the same Regulation, and terminating the proceedings
 in respect of imports of the same product originating in Bosnia and Herzegovina and Turkey.

 The product concerned is welded tubes and pipes, of iron or non-alloy steel, of circular cross-section
 and of an external diameter not exceeding 168.3 mm, excluding line pipe of a kind used for oil or gas
 pipelines, casing and tubing of a kind used in drilling for oil or gas, precision tubes and tubes and
 pipes with attached fittings suitable for conducting gases or liquids for use in civil aircraft. It is
 normally declared within CN codes ex 7306 30 41, ex 7306 30 49, ex 7306 30 72 and ex 7306 30 77.

 It is recalled that on 26 September 2007, the Commission announced the initiation of an anti-
 dumping proceeding with regard to imports of certain welded tubes and pipes, of iron or non-alloy
 steel originating in Belarus, Bosnia and Herzegovina, the People's Republic of China and Russia. On
 the same day, the Commission announced the initiation of an expiry review for imports from
 Thailand, Turkey and Ukraine and an interim review as far as imports from Turkey are concerned
 with regard to imports of certain welded tubes and pipes, of iron or non-alloy steel. On 24 January
 2008, the Official Journal published a notice of initiation of an interim review limited to the dumping
 of the Interpipe Group, an exporter of certain welded tubes and pipes from Ukraine. The
 abovementioned investigations have been treated jointly since they were interlinked with each other,
 in particular as regards the determination of injury and likelihood of recurrence of injury.

 The investigation revealed that the exports from the People's Republic of China, Belarus, Russia and
 Thailand showed the existence of dumping. With respect to Thailand, Turkey and the Ukraine, it was
 examined whether dumping was likely to continue or recur upon a possible expiry of the measures in
 force. It was also established that a significant amount of Russian and Thai exports would be likely to
 be sold in the Community at dumped prices should measures be allowed to lapse. On the other hand,
 it was concluded that there was no continuation of dumping in case of Turkey and that there was no
 likelihood of recurrence of dumping.

 As regards Ukraine, dumping by the Interpipe Group was found to exist. As regards all other
 exporting producers in Ukraine, it was decided that the applicable residual dumping margin would
 not change. It was further established that a significant amount of Ukrainian exports would be likely



Page 8 of 9
 to be sold in the Community at dumped prices should measures be allowed to lapse. Furthermore,
 imports of the product concerned were also found to be dumped.

 With respect to injury, it was concluded that the coincidence in time between the increase of dumped
 imports from the countries concerned, their increase in market share, the undercutting and
 underselling found, and on the other hand, the deterioration of the situation of the Community
 industry led to the conclusion that the dumped imports were a cause of the material injury suffered by
 the Community industry. Furthermore, the investigation revealed that there was, for imports from
 both Ukraine and Thailand, a clear likelihood of recurrence and continuation of injury to a
 Community industry that has been suffering the consequences of injurious dumping for many years.

 It was therefore decided that the following anti-dumping duties should apply:

 •     for imports from Thailand 21.7 – 35.2%;
 •     for imports from Ukraine 10.7 – 44.1%;
 •     for imports from China 90.6%;
 •     for imports from Russia 10.1 – 20.5%; and
 •     for imports from Belarus 38.1%.

 In respect of imports from Turkey, injurious dumping was not expected to continue or recur. As
 regards Bosnia and Herzegovina, the dumping margin was found to be de minimis, i.e., less than 2%.
 Therefore, the proceedings against both Turkey and Bosnia and Herzegovina were terminated
 without imposition of measures.

 Regulation 1256/2008 entered into force on 20 December 2008.

 VI.      The Week Ahead

 No developments to report.

                                                   *




Page 9 of 9

				
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