U.S. Files WTO Cases Against China on Integrated Circuits and Against Mexico on Sweeteners
The Office of the U.S. Trade Representative (USTR) issued a press release on March 18, 2004 announcing that the U.S. has filed a World Trade Organization (WTO) case against China regarding its discriminatory tax rebate policy for integrated circuits.
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The USTR also issued a press release on March 16, 2004 announcing that the U.S. has filed a WTO case against Mexico regarding its 20% sales tax and 20% distribution tax on sweetened beverages that do not use cane sugar.
USTR Alleges China's Tax Policy for Integrated Circuits is WTO Inconsistent
According to the USTR, U.S. exports of integrated circuits to China are subject to a 17% value-added tax (VAT). However, China taxes domestic products significantly less, by allowing firms producing integrated circuits in China to obtain a partial refund of the 17% VAT. As a result of the refund policy, the effective VAT rate on domestic products can be as low as 3%. The USTR states that China also allows for a partial refund of VAT paid on integrated circuits designed in China but manufactured abroad.
The USTR states that the U.S. believes that this discriminatory tax policy is inconsistent with the national treatment obligations that China assumed when it joined the WTO.
The USTR notes that this is the first WTO case filed against China by any WTO member.
USTR Alleges Mexico's Beverage Tax is Inconsistent with its WTO Obligations
According to the USTR, in January 2002, Mexico imposed a 20% sales tax on soft drinks and other beverages that use any sweetener other than cane sugar, and another 20% tax on the distribution of these beverages.
The USTR states that the taxes have sharply restricted U.S. exports of high fructose corn syrup (HFCS), a corn-based sweetener that competes with sugar in many applications.
According to the USTR, the U.S. believes Mexico's beverage tax is inconsistent with Mexico's obligations in the WTO to apply taxes on comparable domestic and imported products in a non-discriminatory manner.
60-Day Consultation Periods Have Begun for Both Cases
In its press releases, the USTR indicates that the U.S.' actions regarding these cases have begun a 60-day consultation period for each case. If consultations fail to resolve the dispute(s), the U.S. can request that a panel(s) be established to consider/determine whether China and/or Mexico is acting in accordance with its WTO obligations.
In its press release for Mexico, the USTR states that the WTO dispute settlement process takes about 18 months if there is an appeal.
(See ITT's Online Archives or 03/17/04 news, 04031799 4, for BP summary of the recent WTO panel ruling in favor of the U.S. regarding Mexico's telecommunications regime.)
USTR press release on China (2004-22, dated 03/18/04) available at http://www.ustr.gov/releases/2004/03/04-22.pdf
USTR press release on Mexico (04-21, dated 03/16/04) available at http://www.ustr.gov/releases/2004/03/04-21.pdf