US Trade Court nullifies tax on Lankan rubber tyre imports

• US Court of International Trade orders removal of 0.95% countervailing duty imposed on Lankan OTR tyre imports  
• Sri Lanka’s solid tyre exports to US has been on growing trend

Sri Lanka has won its first ever court case against countervailing duties,  as a US court ruled that the 0.95 percent countervailing duty attributed to the guaranteed price scheme on import of off-the-road (OTR) tyres from Sri Lanka be removed. 

“Interestingly, as a result, not only 0.95 percent duty is out, the larger 2.18 percent countervailing duty on imports of OTR rubber tyres from Sri Lanka to the United States too will be eliminated under WTO agreements,” a communiqué from the Industry and Commerce Ministry said. Based on a countervailing duty petition filed by US industry at the US Department of Commerce (USDOC) and US International Trade Commission (USITC) alleging that producers of OTR tyres in Sri Lanka benefit from subsidies provided by the government and the subsidized 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 imposition of countervailing duty on imports of OTR tyres from Sri Lanka to the United States.

The USDOC used the subsidy programmes—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 smallholders— by the Sri Lankan government to calculate the countervailing duty margin. After the investigations, the USDOC on January 4, 2017, announced its affirmative final determinations in the countervailing duty investigations and imposed 2.18 percent countervailing duty on imports of OTR tyres from Sri Lanka. 

This margin consisted of 0.41 percent duty on exemptions on fiscal levies on capital and intermediate goods, 0.95 percent on guaranteed price scheme for rubber given to rubber smallholders and 0.82 percent 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 USDOC and International Trade Commission in the investigation stage rebutting the petitioner’s claims. 

After imposition of the countervailing duty of 2.18 percent, 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 percent countervailing duty attributed to the guaranteed price scheme be removed.  With this removal, the overall countervailing duty rate on import of OTR tyres from Sri Lanka to the US imposed by the USDOC has now fallen down below the minimum threshold of 2 percent to impose countervailing duty on developing countries as specified in the WTO Agreements. 

Therefore, the imposition of 2.18 percent countervailing duty on export of OTR Tyres from Sri Lanka to the USA shall now be terminated and not be applied anymore.
Sri Lanka’s solid tyre exports to US has been on a growing trend—US$ 58.21 million in 2012, US $ 56.15 million in 2013, US$ 50.70 million in 2014, US$ 53.22 million in 2015, US$ 60.38 million in 2016 and US$ 69.04 million in 2017. 

Total Lankan exports to US last year was almost close to US$3 billion.

The total bilateral trade with US increased by 12 percent year-on-year to US$ 3.7 billion last year from US$3.3 billion in 2016.