New Delhi: The disputes panel of the World Trade Organization (WTO) on Monday ruled that India violated global trade agreements by imposing tariffs on certain communication and information technology products and asked India to rectify the situation.
The dispute arose because, in 2019, the European Union took India to the World Trade Organisation, alleging that it had imposed higher duties on these products than internationally agreed upon. Taiwan and Japan also soon joined the case against India.
Holocaust The report by a WTO panel is 146 pages long and contains a significant amount of technical jargon, but the crux of the matter appears to be a disagreement over what constitutes an international agreement signed in 1996 and to whom India became a member in 1997. Be a party
The WTO order states, “The European Union challenges the duties imposed by India on imports of certain Information Communications Technology (ICT) products on the grounds that such duties exceed the relevant tariff bindings set out in India’s WTO Schedule.” Are.”
ThePrint reached the commerce ministry for its comment on the order and whether India will appeal against it. This report will be updated upon receipt of a response.
Read also: India pursuing FTAs not only with UK, but also with EU and Canada: Sitharaman in US
where the trouble started
At the center of the dispute are communications and information technology items that include, inter alia, telephones, televisions and recording accessories.
To begin with, it is important to note that the duties imposed by WTO members are linked to a common system of classifying goods across countries, called the Harmonized System (HS) developed by the World Customs Organization (WCO). Is. As is the case with other countries, India’s WTO schedule (collection of taxes imposed by us on various goods and services) is linked to this HS.
This harmonized system is regularly updated by the WCO to keep up with new innovations and products.
“When an updated nomenclature is published, the WCO publishes correlation tables, also called concordance tables, which identify correlations between the product scope of HS headings and subheadings in the previous version of the nomenclature compared to the new version.” does,” the WTO order reads.
In other words, when the HS is updated, all relevant data are provided to all member states so that they can reconcile the new system with the old one.
Using this information, each member country’s schedule is updated to reflect the new HS nomenclature – a process known as ‘transposition’.
“Prior to the establishment of the WTO (in 1995), procedures were adopted that required contracting parties to the General Agreement on Tariffs and Trade 1947 (GATT 1947) to incorporate updated nomenclature into their Schedules and, if necessary, So negotiate… if the scope of concession changes as a result of transposition,” the order said.
Simply put, this means that countries incorporating the updated Harmonized Systems must negotiate at the WTO if their tax structures change as a result of the update.
It is this move that is at the core of the controversy.
the deal that led to it all
The order states that on 13 December 1996, several members of the WTO came together and finalized the Ministerial Declaration on Trade in Information Technology Products (ITA).
“India joined the ITA on March 26, 1997. The ITA participants agreed among themselves to oblige and eliminate customs duties and other duties and charges of any kind in respect of certain products,” the order read.
In April 1997, India proposed amendments to its WTO schedule, which was circulated to all WTO members for their review. These changes to India’s schedule based on the 1996 edition of the Harmonized System (HS1996) were ratified in October 1997.
Then, WTO members agreed to update the Harmonized System to 2002 (HS2002), the order said.
The order states, “For transposition in HS2002, additional procedures were adopted with respect to the transposition procedure…but the onus remained on the members to carry out the transposition procedure.” This too passed without incident.
However, problems arose the next time the WTO tried to update members’ schedules. In 2006, when the WTO prepared to update HS2002 to the 2007 edition, it decided that developed countries would do their own transposition, but that the WTO Secretariat would do the transposition for developing countries unless they indicated otherwise. They will do it themselves.
“Since India did not indicate that it intended to shift its schedule from HS2002 to HS2007, the WTO Secretariat undertook the task of preparing India’s shift,” the order said. “On 8 November 2013, the Secretariat communicated to India via email the draft files for the HS2007 transposition of India’s schedule.”
It was not immediately clear to which email address the WTO secretariat had sent its email.
India responded to the draft files with its comments, after which the WTO Secretariat sent a revised file to India for approval.
“A multilateral review session was held in the Market Access Committee on April 23, 2015, during which the draft files were approved by the members of the Market Access Committee,” the order said.
Among other things, the Committee on Market Access also oversees tariffs and import data administered by the WTO.
“The draft amendment to the Schedule was circulated on 12th May, 2015 and since no objection was received within three months of the circulation [including from India]The schedule changes were certified on 12 August 2015,” it added.
However, the issue did not end there. On 25 September 2018 – three years after the changes were ratified – India requested the WTO Secretariat to correct “certain errors contained in its HS2007 schedule”.
There’s the rub.
India has stated in its request that[w]During migration of HS2002 schedule to HS2007 schedule on relevant products, errors were committed, resulting in wrong bound tariff commitments on some lines which were inadvertently included in the schedule’, the order said.
Further, the order stated that India’s stand was that “various tariff subheadings” for which it was seeking “corrections” in its HS2007 schedule were not covered by the commitments in the ITA, and “[t]New products became part of the schedule from HS2002 to HS2007 due to the WCO transposition.
“India recognized that the reform did not alter its commitments under ‘GATT 1994 or the ITA’, and that ‘[t]The errors in the HS2007 scheduling should be interpreted as an inadvertent oversight by India on the obligation of products not covered by the ITA at 0 per cent.
Simply put, India’s contention was that the move by the WTO Secretariat from HS2002 to HS2007 had added some items to the zero tariff category, which it should not have included.
Several WTO members, including Canada, China, the European Union, Japan, Taiwan, Switzerland and the United States, objected to India’s proposed reform. India’s amendment request is still pending due to these objections.
front panel logic
According to the order document, the EU alleged that “by imposing normal customs duties in addition to the tariff bindings set out in its WTO schedule, with respect to products covered by tariff items identified by the EU, India is acting inconsistently”. With its obligations under GATT 1994.
The order said the EU further asked the panel to recommend that India “take measures consistent with its WTO obligations”.
On its part, India had made several arguments before the EU – the most important being that the products at the center of the dispute do not fall under the ITA and HS2007 schedules and were “certified in error”.
It further stated that since the disputed products do not fall under the ITA, its request for reform was of a “purely formal character” or a formality, and that the objection raised by the EU on the draft reform was baseless and India’s right to Used to interrupt To improve its schedule.
India also argued that it was not imposing duties on some of the products mentioned in the case and was therefore “acting in line with its commitments under the ITA”. These products include ‘line telephone handsets’ and sound recorders, reproducers, television image recorders and accessories of such products.
Finally, it argued that the definition of an “error” under the Vienna Convention on the Law of Treaties means that India’s commitments under the controversial subheading of the WTO schedule are invalid.
What the panel found and what’s next
The WTO panel examined the issue in depth, rigorously examining each and every aspect, and found that India’s tariffs on parts of telephone sets and other equipment for the transmission or reception of voice, images or data are in conflict with GATT 1994. were inconsistent.
This was because “certain products are subject to general duty of customs which are prescribed and provided for in India’s WTO Schedule” and “certain products are subject to general duty of customs which are prescribed and provided for in India’s WTO Schedule”. are provided unless they satisfy certain conditions laid down in the WTO Schedule”, the panel said in the order.
Simply put, the panel found that India was imposing higher tariffs than initially agreed upon on some goods, and that it was imposing tariff-related conditions when these should have been unconditionally tariff-free.
If India appeals against the decision, there is a possibility that the matter could hang in regulatory limbo for some time. This is because the US has been blocking appointments to the WTO’s appeals bench since 2019.
The US ambassador to the World Trade Organization reportedly said reuters in January 2023 that it aims to make the WTO Appellate Body functional by the end of 2024.
(Edited by Uttara Ramaswamy)