Print PDF

Practice Areas

U.S. Avoids Trade Sanctions in WTO Case on Flavored Cigarettes

Tuesday, October 14, 2014
Sandler, Travis & Rosenberg Trade Report

The U.S. and Indonesia have reached an agreement that will resolve a World Trade Organization case against U.S. restrictions on imports of clove cigarettes from Indonesia and avoid the imposition of trade sanctions by Jakarta.

In August 2013 Indonesia asked the WTO to authorize retaliatory measures in response to what it said was the United States’ failure to comply with a WTO ruling against its ban on certain flavored cigarettes. Measures under consideration included higher tariffs on goods imported from the U.S. and a suspension of concessions or other obligations under the WTO Agreement on Technical Barriers to Trade or the Agreement on Import Licensing. Indonesia reportedly set the amount of its proposed retaliation at $50.5 million, which it said reflects the annual value of its lost sales of clove cigarettes in the U.S. market.

However, an article in The Hill quoted one unnamed source as saying, the U.S. and Indonesia have agreed to settle the dispute because “it was creating more problems to their long-term relationship than it was worth.” The Indonesian Ministry of Trade added that the two sides will now “intensify trade and investment cooperation” within their bilateral trade and investment framework agreement “in a more constructive and positive spirit.”

According to press reports, the agreement allows the U.S. to maintain its ban on most flavored cigarettes but requires it to take the following steps.

- “not interfere with the market access of Indonesia made cigars and cigarillos in the U.S. market” until further regulations that are non-arbitrary and non-discriminatory are in place, according to the MOT

- consider adding insulated ignition wiring sets to the list of goods entitled to duty-free treatment under the Generalized System of Preferences, if and when it is reauthorized by Congress (the U.S. had previously denied a petition for such treatment)

- not pursue a WTO case against Indonesia’s restrictions on the export of certain mineral and mining products because export licenses have been issued to affected U.S. companies

- intensify negotiations on a plan to improve intellectual property rights protection and enforcement in Indonesia, which was placed on the Priority Watch List in the U.S. Trade Representative’s most recent Special 301 report

To get news like this in your inbox daily, subscribe to the Sandler, Travis & Rosenberg Trade Report.

Customs & International Headlines