US Trade Court nullifies tax on Sri Lanka rubber tyre imports in historic judgement

July 17, 2018 (LBO) – Sri Lanka has won the first ever revocation of countervailing duty imposed in US for a Lankan export with the removal of duties on the import of off-the-road (OTR) rubber tyres from Sri Lanka to the United States, Ministry of Industry & Commerce said in a statement.

The statement is reproduced below.

Sri Lanka Dept. of Commerce wins historic export judgement in US Trade Courts

Sri Lanka has won the first ever revocation of countervailing duty imposed in US for a Lankan export, thanks to the continued pursuit of the Department of Commerce of Sri Lanka.

“I praise the officials of the Department of Commerce for their committed work to win this judgement in favour of Sri Lanka” said the Minister of Industry and Commerce Rishad Bathiudeen on 16 July in Colombo upon learning about the decision of US Court of International Trade. “This will greatly help our Ministry’s efforts to enhance manufacturing exports, specially rubber products. This helps to strengthen our trade with US as well and helps achieve $3 Bn exports to US very soon. We thank the people of US for looking for Sri Lankan products” Minister Bathiudeen added. DG Commerce of Sri Lanka Ms Sonali Wijeratne agreed that the latest win by DOCSL strengthens US-Sri Lanka trade. “This is Sri Lanka’s first international victory on countervailing duties especially for a well-known rubber product export.“

The US Court of International Trade, on 11th July 2018 has ruled that the 0.95 percent countervailing duty attributed to the guaranteed price scheme on import of off-road OTR tyres from Sri Lanka be removed. Interestingly, as a result, not only 0.95% duty is out but a larger, 2.18% countervailing duty on the imports of off-the-road (OTR) rubber tyres from Sri Lanka to the United States too will be eliminated as a result due to the operation of WTO Agreements once the 0.95% duty is removed. Sri Lanka’s solid tyre exports to US has been on a growing trend-US $ 58.21 Mn in 2012, $ 56.15Mn in 2013, $ 50.70 Mn in 2014, $ 53.22 Mn in 2015, $ 60.38 Mn in 2016 and further strengthening last year to US $ 69.04 Mn. Total Lankan exports to US last year was almost close to $3 Bn-in that, in 2017, $ 2.9 Bn, which was an increase from 2016’s $2.8 Bn.
Total bilateral trade with US increased by 12% to US $ 3.7 Bn last year, from 2016’s $3.3 Bn.

Based on a countervailing duty petition filed by US industry at the US Department of Commerce (USDOC) and US International Trade Commission (USITC) alleging that producers of off-the-road tires in Sri Lanka benefits from subsidies provided by the government and the subsidized imports cause injury to the domestic rubber industry of the United States, the US Department of Commerce initiated a subsidies and countervailing duty (CVD) investigation aiming at imposition of countervailing duty on imports of OTR tyres from Sri Lanka to the United States. The USDOC has used the subsidy programs of “exemptions on fiscal levies on capital and intermediate goods”, “Tax Concessions for Exporters of non-traditional products”, and “guaranteed price scheme for rubber given to rubber small holders by the Sri Lankan government” to calculate the countervailing duty margin. After the investigations, the US Department of Commerce on January 4, 2017, announced its affirmative final determinations in the countervailing duty (CVD) investigations and imposed 2.18 per cent countervailing duty on imports of OTR tyres from Sri Lanka. This margin consists of 0.41% duty on ‘Exemptions on fiscal levies on capital and intermediate goods’, 0.95% on ‘Guaranteed price scheme for rubber given to rubber small holders’ and 0.82% duty on ‘Tax Concessions for Exporters of non-traditional products’.

On behalf of the Sri Lanka government, the Department of Commerce of Sri Lanka, in collaboration with the Attorney General’s Department and Camso Loadstar (the affected exporter in Sri Lanka), made a number of submissions to the US Department of Commerce and the International Trade Commission in the investigation stage rebutting the petitioner’s claims. After imposition of the countervailing duty of 2.18 percent, the Department of Commerce of Sri Lanka, with the assistance of other line agencies and the local company, took necessary measures to challenge the decision by the USDOC at the US Court of International Trade. As a result of effective interventions by the Department of Commerce in the appeal procedures, the US Court of International Trade ruled that the 0.95 percent countervailing duty attributed to the guaranteed price scheme be removed. With this removal, the overall countervailing duty rate on import of OTR tyres from Sri Lanka to the US imposed by the USDOC has now fallen down below the minimum threshold of 2 percent to impose countervailing duty on developing countries as specified in the WTO Agreements. Therefore, the imposition of 2.18 percent countervailing duty on export of OTR Tyres from Sri Lanka to the USA shall now be terminated and not be applied anymore.