EU Issues Annual Report on U.S. Barriers to Trade and Investment

The European Union recently issued its 2007 report on U.S. barriers to trade and investment. The report examines a wide variety of obstacles encountered by EU exporters and investors in the U.S. Many of the complaints listed in the report are similar to those included in the 2005 and 2006 editions. Some of these complaints are described below. It should be noted that while some of these grievances may not be applicable in the case of Canadian exports where goods originate in the NAFTA region, many of them, particularly in terms of non-tariff barriers do have similar relevance.

Textile Duties
According to the European Commission, high tariffs make the U.S. one of the most difficult export markets for EU textiles and apparel. EU industry considers that U.S. tariff peaks constitute a very harmful barrier because they are focused on very competitive products. In addition, specific duties apply for a wide range of textile products.

Labeling Rules
Extensive product description requirements complicate EU textile exports to the U.S. and result in additional costs. Rules are burdensome for marking and labeling retail packages to clarify the country of origin, the ultimate purchaser in the U.S. and the name of the country in which the article was manufactured or produced. Furthermore, there are requirements relating to the typology/physical characteristics of clothing labels (given size, font used, etc.). These standards are different than those in the EU, meaning that special labels are needed for the U.S. market.

Customs Requirements
Customs formalities for imports of textiles, apparel and footwear to the U.S. require the provision of particularly detailed and voluminous information, which lead to additional costs and in some cases include confidential processing methods (type of finishing, dyeing, etc). In addition, the liquidation period of up to 210 days is too long. Given the short life span of apparel products, the retailer or importer is often not in a position to re-deliver the goods upon U.S. Customs and Border Protection’s request, in which case CBP applies a penalty equal to 100 percent of the value of the goods.

Rules of Origin for Textiles
European companies reportedly face difficulties with U.S. rules of origin for certain textiles, especially scarves, bed linen, table linen, bedspreads and quilts containing cotton and wool. For these products, the country of origin is still the country of origin of the fabrics, even if the fabrics have been dyed and printed and have undergone two or more finishing operations in the EU. Therefore, the producers of these products have to label their products with the country of origin of the fabric, which does not reflect the work of design and the production process performed in Europe.

SAFE Port Act
The EC, EU member states and the European trade community in general are seriously concerned about this legislation, especially the potential costs of the 100 percent scanning requirement and its possible impact on EU competitiveness and transatlantic trade flows. The report notes that the implementation of such a requirement in more than 600 ports from which ships leave for the U.S. would lead to major trade disruptions and an additional administrative burden, requiring major restructuring of EU ports and placing a very heavy financial burden on EU businesses and taxpayers. Other requirements included in the SAFE Port Act (e.g., standards for container security and/or smart box technology) are also looked upon with trepidation because they have the potential to negatively impact the competitiveness of EU suppliers.

Container Security Initiative
CSI screening and related additional U.S. customs routines are causing significant additional costs and delay to shipments of certain EU products. In August 2005, the U.S. agreed to the participation of more EU ports in the CSI where they comply with certain jointly agreed minimum standards and where no U.S. officials will be stationed. For this project, a pilot action was performed in 2007 in the port of Szczecin (Poland). Similar actions are planned in Aarhus (Denmark) and Salerno (Italy) this year.

User Fees
The EC argues that the Merchandise Processing Fee is likely to exceed the cost of the service provided at the port since it is based on the value of the imported good.

“Buy American” Berry Amendment
The fiscal year 2006 defense authorization act contains changes to the Berry Amendment that expand the coverage of the Amendment’s Buy American provisions. The new language requires the Department of Defense to notify Congress within seven days if it awards a contract to a foreign manufacturer and to place the contract on a General Services Administration Web site. The new provisions also expand the coverage of the Berry Amendment by requiring that components of textiles and apparel are also made in the U.S. In addition, the bill contains a provision mandating training programs for DOD personnel about the Berry Amendment. According to the EC, these provisions will hamper the DOD’s flexibility in applying the Berry Amendment by opening waiver decisions to continuous challenge by the domestic textile industry.

EU Certificates of Origin
The EC claims that the U.S. does not recognize the EU as a customs union, which effectively means that EU certificates of origin are not accepted by CBP.

Extraterritoriality
The EC continues to oppose the extraterritorial aspects of certain U.S. legislation, including the Cuban Liberty and Democratic Solidarity Act (a.k.a. the Helms-Burton Act) and the Iran Freedom Support Act. The EC is also concerned about the extraterritorial provisions of the Patriot Act.

A copy of the complete report can be downloaded here (PDF format).