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Sri Lanka has won the first ever revocation of countervailing duty imposed in the US for a Lankan export, under a case filed by the Department of Commerce to assist its tyre exports.The US Court of International Trade on 11 July ruled that the 0.95% countervailing duty attributed to the guaranteed price scheme on the import of off-road OTR tyres from Sri Lanka be removed.
As a result, not only is the 0.95% duty 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 will also be eliminated due to the operation of WTO Agreements once the 0.95% duty is removed.
Sri Lanka’s solid tyre exports to the US has been on a growing trend with $ 58.21 million in 2012, expanding to $ 69.04 million last year. Total Lankan exports to US last year was almost close to $ 3 billion.
Total bilateral trade with the US increased by 12% to $ 3.7 billion last year, from 2016’s $ 3.3 billion.
Based on a countervailing duty petition filed by the 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 benefit from subsidies provided by the government and the subsidised 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 imposing 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 4 January 2017 announced its affirmative final determinations in the countervailing duty (CVD) investigations and imposed 2.18% 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 the imposition of the countervailing duty of 2.18%, 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% countervailing duty attributed to the guaranteed price scheme be removed.
With this removal, the overall countervailing duty rate on the import of OTR tyres from Sri Lanka to the US imposed by the USDOC has now fallen below the minimum threshold of 2% to impose countervailing duty on developing countries as specified in the WTO Agreements. Therefore, the imposition of 2.18% countervailing duty on the export of OTR Tyres from Sri Lanka to the US shall now be terminated and not applied anymore.
“I praise the officials of the Department of Commerce for their committed work to win this judgment in favour of Sri Lanka,” said the Industry and Commerce Minister Rishad Bathiudeen. “This will greatly help our ministry’s efforts to enhance manufacturing exports, especially rubber products.”
Commerce Department Director General Sonali Wijeratne agreed that the latest win strengthens US-Sri Lanka trade. “This is Sri Lanka’s first international victory on countervailing duties, especially for a well-known rubber product export.”
