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Knitting / Apparel

E.U. Drops Tax On U.S. Jeans

WASHINGTON — March 31, 2014 —  Effective May 1, the European Union will drop a 26% retaliatory tax on women’s jeans made in the U.S. to 0.35%. This move will lower the EU duty rate on such jeans to 12.35% a year after it saw a significant increase in an ongoing trade dispute.

The duty rate hike on jeans was part of a continuation of sanctions authorized by the World Trade Organization in retaliation for the United States’ failure to fully comply with a WTO ruling against the Continued Dumping and Subsidy Offset Act of 2000. Commonly referred to as the Byrd Amendment, this law allowed the U.S. to distribute antidumping and countervailing duties collected on foreign-made goods to affected domestic industries. The law was found to violate WTO rules and subsequently repealed, but distributions were allowed to continue for cases initiated prior to the repeal.

In response, the WTO allows each affected country to raise its tariffs on goods imported from the U.S. in direct relation to the amount of AD and/or CV duties on goods from that country that were distributed during the previous year. When the amount distributed in 2012 with respect to EU goods spiked, so did the value of U.S. exports the EU could target, prompting Brussels to add women’s jeans to the retaliation list for 2013. However, distributions in 2013 decreased by nearly half of the 2012 amount, resulting in the drastic reduction of the retaliatory tariffs on jeans and other goods.

Sandler, Travis & Rosenberg, P.A., has been actively working since the EU imposed the tariff hike to obtain relief for affected U.S. manufacturers. For example, the United Kingdom’s customs and tax department accepted a legal argument crafted by ST&R attorney Elise Shibles that certain jeans, despite being made of denim as that term is used in the apparel industry, do not fall within the legal definition of denim under the Harmonized Tariff Schedule because the dye used to make them is not colorfast. The alternative classification of the subject jeans is only subject to the basic 12% tariff. Shibles, along with the Warsaw-based EU office of Sandler & Travis Trade Advisory Services, Inc. has since been helping U.S. jeans makers that had been paying the higher 38% duty to secure refunds.

Posted March 31, 2014

Source: Sandler, Travis & Rosenberg, P.A.

 




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